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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-11428
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INFORMATION RESOURCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-2947987
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
150 NORTH CLINTON STREET, CHICAGO, ILLINOIS 60661
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (312) 726-1221
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
COMMON STOCK, $.01 PAR VALUE PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 28, 2001 (based on the closing price as quoted by
NASDAQ as of such date) was $138,559,020.
The number of shares of the registrant's common stock, $.01 par value per
outstanding share, as of February 28, 2001 was 29,074,577.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the annual meeting
of stockholders to be held May 18, 2001 to be filed pursuant to Regulation 14A
are incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Information Resources, Inc. and its subsidiaries (collectively referred to
herein as "IRI" or the "Company") is a leading provider of universal product
code ("UPC"), scanner-based business solutions services to the consumer packaged
goods ("CPG") industry, offering services in the U.S., Europe and other
international markets. The Company supplies CPG manufacturers, retailers and
brokers with information and analysis critical to their sales and marketing
operations. IRI provides services designed to deliver value through an enhanced
understanding of the consumer to a majority of the Fortune 500 companies in the
CPG industry. IRI is also commercializing new ways of integrating the Company's
current off-line research with new on-line research capabilities for CPG clients
as well as leveraging its core capabilities outside the CPG industry.
The Company currently generates approximately 75% of its revenues from
sales and services provided in the U.S. These services center in large part
around the Company's flagship InfoScan(R) service, which tracks consumer
purchasing of products sold in grocery stores, drug stores, mass merchandisers,
convenience stores and other retail outlets across the United States. The
Company also offers a number of other services to CPG manufacturers, including
household-level information collected via consumer panels. One such service is
BehaviorScan(R) which is used for the testing and evaluation of alternative
marketing strategies and tactics for both new and established products. The
Company also offers modeling and other testing services as well as custom
analytic and consulting services to enable clients to address critical business
issues. Closely related to its information services, the Company also markets
various software applications to the CPG industry.
The Company provides many of the same business information services in
Europe and other international markets primarily using scanner-based data.
Revenues from the Company's U.S. and International Services were as follows for
the years ended December 31 (in thousands):
2000 1999 1998
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U.S. Services......................................... $397,895 $416,729 $396,992
International Services................................ 133,028 129,544 114,331
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Total.......................................... $530,923 $546,273 $511,323
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U.S. AND INTERNATIONAL SERVICES
The Company's U.S. and International Services include InfoScan product
tracking services, related delivery and software product sales, consumer panel
services, analytical and consulting services, BehaviorScan product testing
services and a variety of applications of the Company's census (i.e., all stores
within participating retail chains) scanner databases and the Company's
multi-outlet consumer panel databases.
InfoScan. The Company's principal information service marketed in the
United States and internationally is InfoScan. InfoScan is a service used by the
CPG industry to monitor and evaluate the market performance of products sold in
retail stores. The InfoScan service provides subscribers with a variety of
information including how much product they and their competitors are selling,
where the products are being purchased, at what price the products are being
sold and under what promotional conditions sales are occurring. This information
helps subscribers make fundamental strategic and tactical decisions for their
businesses in the areas of sales, marketing and promotion. IRI currently
collects this information in grocery, drug, mass merchandiser, convenience
store, club store and chain liquor outlets across the United States and is also
exploring collection in other outlets.
InfoScan utilizes data collected from UPC bar codes on CPG product
packaging. Scanners at retail checkouts read the UPC code and record product
sales electronically. On an on-going basis, the Company procures such electronic
sales data along with related promotional data from a sample of national and
local
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market retail stores. The Company also collects consumer purchase information
directly from individual households across the United States using proprietary
in-home scanning devices and/or consumer identification cards in a store. The
consumer purchase information can be used in a complementary fashion with
InfoScan data. The Company processes the information at its computer facilities
and stores it in the Company's proprietary databases. InfoScan subscribers
access the information in the Company's databases through a variety of means,
including the use of analytical software provided by the Company and the use of
reports delivered via the Internet.
Subscriptions to InfoScan by CPG manufacturers are a principal source of
revenue for the Company. Manufacturers subscribe to InfoScan by contracting with
the Company to obtain access to the InfoScan databases for specified product
categories. InfoScan contracts generally have multi-year terms, usually of three
years or more in the United States.
InfoScan Census. InfoScan Census applications are derived from a product
tracking service based on scanner data collected from all stores within
participating retail chains, as opposed to collection from a sample of such
stores. InfoScan Census offers the CPG industry more complete and accurate data
than sample services, since it has no sampling or projection errors for census
chains, and its applications can go beyond traditional market tracking uses. The
majority of IRI's clients' databases use a census-based projection system.
InfoScan Census revenues come primarily from manufacturers purchasing key
account data, which are sales data for a product category based on all the
stores of a specific retailer. This service enables manufacturers' sales
representatives to negotiate with retail buyers based on a mutually consistent
and accurate measure of retail product movement. In addition, an evaluation of
differences in brand and product category purchasing across individual stores
within a chain can often pin-point opportunities to effectively build sales to
the benefit of both manufacturers and retailers. Other census applications
include improved management of trade promotions, validation of
"pay-for-performance" promotions, more effective sales force and broker
compensation programs and improved inventory and distribution management.
There are presently 15,000 grocery stores, 14,400 drug stores and 3,300
mass merchandisers in the Company's InfoScan Census U.S. database. The Company
has also begun to develop InfoScan Census services in certain European markets.
InfoScan Data Collection. For the Company's InfoScan sample service, the
Company continuously collects weekly product sales, price and promotional
information from representative retail outlets. Included in the Company's
national and local market samples in the U.S. are approximately 4,500 stores in
the aggregate, including grocery stores, drug stores, mass merchandisers and
convenience stores. Contracting retailers typically deliver their scanner data
electronically to the Company's computer facilities in Wood Dale, Illinois.
While most retail stores in the United States have installed scanner equipment
to record product sales information, certain convenience stores and other retail
outlets have not. When scanner data are not available, field personnel visit
stores and obtain sales information via a manual audit of the stores' product
purchases and inventory. Collection practices for weekly product sales
information in the Company's operations in foreign countries are largely
scanner-based, though they vary somewhat on a country-by-country basis, as does
scanner data availability.
The InfoScan U.S. and international databases typically contain product
movement and price information and "causal" data. Causal data consist of
information which may explain changes in product sales, such as price
promotions, retailers' newspaper ads and in-store displays, as well as other
promotion and merchandising data related to the sale of CPG products. In 2000,
IRI's causal data was collected in the United States by a field force of
full-time and part-time workers leased from IRI by Mosaic InfoForce, L.P., a
joint venture company formed during 2000 by IRI and Mosaic Group, Inc., a
leading Canadian outsourced marketing services agency with operations in Canada,
the United States and Europe. These data collectors, who became employees of
Mosaic InfoForce, L.P. effective January 1, 2001, conduct weekly on-site visits
to retail stores participating in the InfoScan service to collect causal
information such as in-store promotions and displays. Mosaic InfoForce, L.P.
provides additional related services, including custom data collection, custom
and syndicated observational audits, and other in-store activities such as light
merchandising services.
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The Company often pays cash for scanner data covering a sample or census of
retailers' stores. However, the Company also exchanges software, product
movement information and other services to obtain access to data for all stores
within certain grocery stores, drug chains and mass merchandiser stores. The
Company provides its QScan(R) system to U.S. retailers in exchange for their
participation in the provision of their all-store data for InfoScan Census.
QScan is an information system designed to provide retailers with easy access to
their scanner data. The system addresses retailers' problems of organizing and
analyzing their own databases of information for products sold in their stores.
The QScan system allows for the processing and analysis of scanner data from all
of the retailer's stores on a weekly basis. Current census data retailer
contracts generally have multi-year terms, usually of three or more years,
cancelable on an annual basis after one or more years with 3 to 6 months notice
by either party. Other data procurement contracts generally run year-to-year and
are cancelable at the end of each year by either party with 60 days notice.
Consumer Panel. The Company also collects consumer purchase information via
its panel data service from individual households it has recruited in the United
States. The Company provides approximately 55,000 of these households with
hand-held scanners to record their product purchases. Collection via hand-held
scanners enables the Company to ascertain product movement information from a
full spectrum of retail outlets, including stores that do not have scanners. In
addition to the Company's multi-outlet consumer panel service, the Company also
maintains a separate consumer panel of shoppers from approximately 23,000
households in its BehaviorScan testing markets in connection with the Company's
provision of testing and analytics service. These additional households either
use the same scan device as the multi-outlet panelists or present an
identification card when shopping at participating grocery stores, thereby
allowing scanners to record specific details of their product purchases.
Household panel information is available in European markets from alliance
partners of the Company. The Company provides a variety of syndicated and custom
databases and analytics utilizing the multi-outlet panel data to provide
retailers and manufacturers with insights into consumer purchase behavior. The
Company has also developed products and services for providing information on
both on-line and off-line consumer buying habits using a subset of its
multi-outlet panel that is web-enabled. See "Other Services" below.
Data Processing. With respect to its operations in the U.S., Great Britain,
France, Italy, the Netherlands and Spain, the Company receives and processes
data at its production center and computer facilities located in Wood Dale,
Illinois. The Company is also in the process of transitioning data processing in
Germany from an outside vendor to its facilities in Wood Dale, Illinois. The
Company's production center operates with numerous platforms including
mainframe, UNIX and Windows NT as well as proprietary production software and
related technology developed exclusively by the Company to process and store
very large amounts of data. Through direct telecommunication connections with
InfoScan clients in the U.S., the Company also provides electronic on-line
access to InfoScan data services. The Company currently leases its mainframe
computers from third party financial institutions.
Data Delivery. Subscriptions to the InfoScan service entitle the Company's
clients to access the Company's databases and receive information for specific
product categories. Because large amounts of data are involved, clients usually
either take electronic delivery of the data or obtain electronic access to the
Company's databases through the Company's on-line service. Clients taking
electronic delivery generally license software from the Company. The Company's
on-line service permits the Company to build, maintain and store
client-subscribed databases which remain resident on the Company's computers.
Clients then access the databases through remote electronic connection. Clients
may also purchase software services from the Company. (See "Software and Related
Products" below for more information on Company revenues derived from software
licensing.) In addition, the Company also provides Internet delivery options,
including custom reports via a Company-hosted web site.
Other Client Services. The Company places a major emphasis on the provision
of experienced and knowledgeable client service personnel to assist InfoScan
subscribers in the use and interpretation of InfoScan data and consumer panel
data, as well as in the use of the Company's analytical software. The Company
also provides numerous analytical and consulting services to both CPG
manufacturers and retailers. Analytical and consulting services are directed at
helping clients identify new marketing opportunities, more effectively manage
their marketing mix, identify appropriate opportunities for product line
optimization and increase
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productivity of marketing expenditures through more effective couponing,
advertising and in-store merchandising programs. Revenues from analytical and
consulting services typically follow from subscriptions to the Company's
InfoScan service and principally relate to analytical use of InfoScan and panel
data. These services are generally billed on a time and materials basis.
Software and Related Products. In close association with its retail
tracking services around the world, the Company markets analytical software to
the CPG industry principally for use in accessing, managing and analyzing the
Company's databases. In July 1995, the Company sold its EXPRESS technology and
certain software products to Oracle, while retaining ownership of certain
EXPRESS-based sales and marketing software application products for use in the
CPG industry. Many of the Company's U.S. and International clients currently use
the Oracle EXPRESS-based software application, Oracle(R) Sales Analyzer, to
access, manage and analyze the Company's databases. Oracle EXPRESS is a software
technology designed for working with large and complex databases. Oracle Sales
Analyzer is a decision support software application built in Oracle EXPRESS and
is now owned by Oracle. The product provides users with a range of analytical
and reporting tools. Through licensing agreements with Oracle, the Company
continues to market and distribute certain Oracle EXPRESS software products,
including Oracle Sales Analyzer. The Company typically licenses its own
applications as well as Oracle Sales Analyzer in conjunction with a client's
InfoScan data subscription.
A principal source of software revenues is the provision of on-line access
services and web delivery services to InfoScan subscribers who access InfoScan
databases residing in the Company's data warehouses. Other software revenues are
derived from the license of Oracle software product licenses to InfoScan
subscribers who load InfoScan data on their own computer systems and do not use
the Company's on-line services. Oracle is entitled to receive royalties on
certain types of Oracle software licenses granted by the Company and its
distributors; however, until July 2001, the Company is not required to pay
royalties to Oracle on licenses granted by the Company and its data affiliates
to CPG end-users for use with data provided by the Company or its data
affiliates.
The Company is in the process of negotiating the terms under which it will
have the right, after July 2001, to continue to grant new licenses of current
versions of Oracle software products and provide maintenance services for such
new licenses to its clients for use in accessing Company data. There can be no
assurance that the Company will be able to successfully negotiate a new
agreement, or extension of the existing agreement, with Oracle for new licenses
of current versions of Oracle software products or maintenance or that any new
or extended agreement will be on terms no less favorable than the existing
agreement. However, the Company believes that its failure to negotiate a new
arrangement with Oracle on favorable terms is not likely to have a material
adverse effect upon the Company's business operations or financial results. This
is due primarily to the following: (i) most of the Company's user base has
existing licenses to use Oracle software products to access Company data, for
which the Company provides support directly rather than through Oracle, and (ii)
the Company is in the process of enabling several alternative technologies to
provide clients with options to access the Company's data. These alternative
technologies are expected to increase accessibility of the Company's Infoscan
data as well as other data, improve compatibility with existing technical
architectures of the Company's clients and partners, extend integration with
additional data sources, and facilitate the deployment of emerging
internet-based technologies. Specifically, the Company is bringing to market an
open systems relational database access product, based on Open Database
Connectivity (ODBC), a commonly accepted industry standard. ODBC will enable
clients to use a broad array of third-party tools and/or applications to access
the Company's data. The Company is also developing a new easy-to-use data
retrieval, analysis and reporting suite called InfoPro. InfoPro will allow users
to easily access, manipulate and analyze IRI and other data within the familiar
environment of Microsoft Office(R). Finally, many of the Company's clients also
use the Company's CPGNetwork(TM) service to access Company information and other
personalized content via a Web Browser.
The Company also markets its proprietary Apollo Space Management System(TM)
software to CPG retailers, wholesalers, manufacturers and brokers in the United
States and internationally for use in managing retail shelf space and software
applications to facilitate enhanced uses of InfoScan data. Apollo software is
designed to assist in the management of retail shelf space, providing a range of
tools for space management
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and shelf execution, including assortment planning, data integration and
management, category analysis, creation of picture schematics and web
communications and access. The Company also develops and markets other
analytical software applications and technology-based consulting services for
use in the CPG industry, including tools to help clients receive, analyze,
interpret and facilitate enhanced uses of InfoScan data.
Testing Services. The Company provides a number of testing services
primarily for CPG manufacturers. These include controlled retail testing, other
in-store testing, matched market analyses and related special analyses using the
Company's InfoScan and panel databases. Controlled testing involves testing the
placement of new products or changes in advertising, shelf location, price or
promotional conditions in different retail outlets or different markets and
involves custom manipulation and analysis of the Company's InfoScan databases.
The Company's BehaviorScan service is a test marketing system available in the
United States which enables CPG manufacturers to measure the impact of different
marketing variables on consumer purchase behavior, for both new and existing
products. Typical marketing variables tested in BehaviorScan markets are
television advertisements, newspaper ads, manufacturers' coupons, free samples,
in-store displays, shelf price and packaging changes. BehaviorScan tests compare
the purchases of a group of consumers exposed to test variable(s) with the
purchases of a control group of consumers not exposed to the test variable(s). A
unique feature of the BehaviorScan system is its ability to deliver alternative
television advertising to different groups of panel households using the
Company's patented targetable television technology. BehaviorScan is currently
available in five markets and is the only such electronic test marketing system
in the United States. Major costs associated with the BehaviorScan system
include payments to retailers, incentive programs for participating panel
households, field personnel costs, cable television studio operation, computer
resources and client service personnel costs.
Other Services. The Company continues to develop opportunities to leverage
its core competencies. The Company has entered into various strategic alliances
that include expanded media mix analysis, Internet strategy development and
on-line business-to-business and consumer research panels. In conjunction with
an alliance with Forrester Research, Inc. that integrates the Company's consumer
purchasing behavior data with Forrester's industry leading Internet research
capabilities and proprietary approach to segmenting consumers based on their
attitudes and behaviors, the Company provides marketers an array of insights for
Internet marketing strategy. Through its emarkit(TM) services, the Company
offers an Internet toolkit to help CPG clients develop, implement and evaluate
Internet strategies. In addition, the Company's agreement with DoubleClick, Inc.
allows IRI to test Internet banner advertising on CPG products to evaluate its
effect on consumer purchasing. The Company is also continuing to explore ways of
offering additional services to both CPG clients and new client bases that
integrate the Company's current off-line research with new on-line research
capabilities.
INTERNATIONAL BUSINESS DEVELOPMENT
Through subsidiaries and joint ventures with other leading marketing
information firms, the Company in 1992 began offering information services in a
number of countries outside of the United States. Specific services offered
depend upon local country competitive conditions and the general retailer
environment. The Company's major European subsidiaries and joint venture
companies rely on the Company's data production facilities in the United States
as well as the Company's know-how and trade secrets to provide InfoScan retail
tracking services. Production for the Company's German operation will be
transferred to the United States in mid-2001.
The Company's only significant competitor offering product tracking
services internationally is the ACNielsen Company ("ACNielsen"). (See
"Competition" below.) The Company competes with ACNielsen in virtually every
foreign market where the Company has established information services. ACNielsen
maintains a larger market share throughout all of Europe where the Company's
expenditures to establish product tracking services over the last five years
have been most significant.
United Kingdom. The Company's subsidiary in the United Kingdom offers a
retail tracking service under the InfoScan name to the British market. Organized
in 1992 as a joint venture, the Company's initial partners
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were Taylor Nelson Sofres plc of the United Kingdom ("TNS") and GfK AG of
Germany ("GfK"). The Company now owns substantially all of the joint venture. In
1993, the venture expanded its sample of scanning stores, initiated the
collection of causal data and began offering a fully operational scanning
service covering major chains under the InfoScan name. It also expanded the
service to cover stores selling health and beauty aids. Pursuant to contractual
arrangements, the Company provides data production services to the subsidiary
from the Company's computer facilities in Wood Dale, Illinois. During 2000, the
subsidiary acquired a 40% interest in Radar Research Limited ("Radar"), a United
Kingdom company that performs testing services in key retailers. TNS owns the
remaining 60% of Radar.
France. The Company's subsidiary in France offers scanner-based tracking
services under the InfoScan name. In 1993, the Company organized a joint
venture, IRI-SECODIP S.C.S. with GfK and SECODIP S.A. to acquire the operations
of SECODIP's retail audit business and the business of a former
development-stage scanner-based operation of GfK. Since 1994, the Company has
funded substantially all of the joint venture's capital requirements and the
Company now owns substantially all of the joint venture interests. Pursuant to
contractual arrangements, the Company provides data production services to the
subsidiary from the Company's computer facilities in Wood Dale, Illinois.
Italy. In 1994, the Company began development of an information service in
Italy through the formation of a wholly-owned subsidiary, IRI InfoScan Italy.
Its basic service consists of retail sales and promotion tracking using a sample
of retail grocery outlets. Supermarket sales are tracked by means of scanning
data, while sales in smaller, traditional shops are measured by manual audit
techniques. Pursuant to contractual arrangements, the Company provides
production services to IRI InfoScan Italy from the Company's computer facilities
in Wood Dale, Illinois.
Germany. The Company operates a retail tracking service joint venture in
Germany through a subsidiary whose minority shares are held by GfK. From 1993
through 1996, the Company owned a 15% interest in GfK Panel Services GmbH ("GfK
Panel"), then a subsidiary of GfK. During that time, GfK Panel offered both
retail and consumer panel tracking services based on consumer household panel
data, retail audit data, scanner data and provided related consulting studies.
In February 1997, the retail tracking service and related software businesses
were put into a new joint venture company, IRI/GfK Retail Services GmbH
("IRI/GfK Retail") in which the Company initially took a 51% ownership interest
and GfK the remainder. Effective January 1, 1999, the Company's funding
requirements per the joint venture agreement increased to 80%. The Company is in
the process of transitioning production services for IRI/GfK Retail from GfK's
facilities in Nuremberg, Germany to the Company's facilities in Wood Dale,
Illinois. This transfer is expected to result in service enhancements, as well
as reduced production costs.
In 1997, the Company sold its 15% ownership interest in GfK Panel to GfK.
GfK Panel continues to provide consumer panel and ad hoc research services to
the German market, and GfK Panel and IRI/GfK Retail cooperate in selling and
delivering services to common clients.
Benelux. The Company and GfK operate a joint venture which offers a
scanner-based retail tracking service to the Netherlands market. This
scanner-based retail tracking service became fully-operational in 1994. Until
early 1998, this joint venture was owned 80.1% by GfK and 19.9% by the Company.
In February 1998, the Company increased its ownership to 51% and took over
management responsibilities and in February 1999, its ownership interest
increased to 80% while funding requirements remained at 51% per the joint
venture agreement. The Company's funding requirements per the joint venture
agreement increased to 80% during 2000. It now operates under the name
Information Resources GfK B.V. Pursuant to contractual arrangements, the Company
provides production services to the joint venture through the Company's computer
facilities in Wood Dale, Illinois.
In 1998, the Company also sold a 9.9% interest in GfK Panel Services
Benelux B.V. reducing its ownership to 10%. This company operates household
panel services in the Netherlands and Belgium and continues to cooperate with
the Netherlands joint venture scanner operation in the sale and delivery of
services to common customers.
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Spain. IRI began a start-up venture in Spain during April 1998. In November
1998, the Company executed a joint venture agreement with Media Planning, S.A.
to create a new retail tracking business to serve the Spanish market under the
name Information Resources Espana, S.L. ("IRI-Spain"). In January 1999,
IRI-Spain and Dympanel, S.A. signed a cooperation agreement which added
Dympanel, S.A. as a third investor in IRI-Spain. The aforementioned agreements
resulted in the Company, Media Planning, S.A., and Dympanel, S.A. currently
owning 65%, 32% and 3%, respectively, of the capital shares of IRI-Spain. IRI-
Spain began providing InfoScan service to the Spanish market in early 1999,
using the Company's production facilities in Wood Dale, Illinois.
Greece. The Company operates a retail audit business in Greece which it
acquired in 1994. The operation includes collecting, reporting, analyzing and
interpreting national and regional sales data from retail audits.
Sweden. The Company owns an 8% interest in an inactive joint venture formed
in 1995 with GfK for the provision of scanner-based product tracking services in
Sweden. The business was managed by GfK until September 2000 when client
contracts were transferred to a third party.
Eastern Europe, Middle East and North Africa. In 1995, the Company entered
into a strategic alliance with Middle East Market Research Bureau ("MEMRB"), a
market research company based in Cyprus. MEMRB provides market research
throughout more than 20 countries in the Middle East, Eastern Europe, the
Mediterranean, the Commonwealth of Independent States and North Africa. Under
the terms of the agreement, MEMRB has agreed to cooperate in the adoption of
multi-country technical standards developed by the Company and co-market certain
information and software products with the Company. In 1998 IRI acquired a 19.9%
ownership interest in MEMRB, which decreased to 16% in 1999 due to funding from
a new partner. The Company holds an option to increase its ownership interest of
MEMRB to 49%.
Asia and Australia. The Company has a joint venture in Japan with
Tokyo-based Mitsui & Co., Ltd. to provide information services in Japan. The
Company's ownership in the joint venture, which was formed in 1995, was
initially 60%. Effective May 1998, Mitsui & Co., Ltd., increased its ownership
to 60% and the Company's ownership was reduced to 40%. Until September 2000, the
Company also had wholly-owned software distribution subsidiaries in Japan and
Australia. The distribution of the Company's proprietary Apollo software
products has now been transferred to the joint venture in Japan and an unrelated
company in Australia and the businesses of these subsidiaries have been
discontinued.
Latin America. The Company has operations in certain Latin American markets
through joint ventures and subsidiaries in Venezuela, Puerto Rico and Guatemala.
The Company owns 49% of the Venezuelan joint venture, Datos Information
Resources, which provides audit-based product tracking as well as ad hoc and
software services to the Venezuelan market. The Company's wholly-owned
subsidiary in Puerto Rico offers both audit-based product tracking and ad hoc
marketing research services. The Company owns 19.9% of a Guatemalan-based
company that provides research services in Central America. In addition, the
Company has distributors of its proprietary Apollo software products in Peru,
Brazil and Argentina.
Mexico. The Company has a wholly-owned software distribution subsidiary in
Mexico to provide software and consultancy services to both CPG and non-CPG
clients in Mexico.
TRADEMARKS, PATENTS, LICENSES AND SOFTWARE PROTECTION
The Company is the owner of various trademarks, including InfoScan(R),
InfoScan Census(TM), InfoForce(TM), QScan(TM), IRI Software(TM),
BehaviorScan(R), Apollo(TM), CPGNetwork(TM), CPGNetwork.com(TM),
Attitudelink(TM), Consumer Knowledge Suite(TM), emarkit(TM), e-Scan(TM),
e-profile(TM), e-response(TM), e-testing(TM), ScanKey(TM), Shoppers' Hotline(R),
Shoppers Hotline Elite(R), Shoppers Hotline EliteNet(TM), EZPrompt(R),
CouponScan(TM), InfoPro(TM), InSite Reporting(TM), XLerate(TM), ReviewNet(TM),
PromoProphet(TM) and PromotionScan(TM). The Company also holds certain patents
relating to the targetable television technology utilized in its BehaviorScan
service. The patents expire at various dates through 2005. Loss or infringement
of these patents would likely not have a material adverse effect upon the
Company's revenues.
As a result of the Company's sale of its EXPRESS technology and line of
certain software products to Oracle in July 1995, the Company no longer owns a
large portion of the software that is currently used in the
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delivery of InfoScan data. The Company secured a license back from Oracle
assuring the continued use of certain of the EXPRESS software products in the
Company's business, including rights to sublicense software to clients of the
Company. The initial term of the license expires in July 2001. The Company also
has rights to use various trademarks owned by Oracle, including Oracle EXPRESS
and Oracle Sales Analyzer. (See "Software and Related Products" above.)
The Company regards its databases as proprietary and, in addition to
copyright protection, relies upon trade secret laws, limitations on access to
its computer source codes, confidentiality agreements with clients and internal
nondisclosure safeguards to protect its rights to proprietary interests. The
Company's own computer software is also proprietary and bears appropriate
copyright notices.
Because of the rapid pace of technological change in the computer industry,
trademark, patent or copyright protection is of less significance than the
knowledge and experience of the Company's personnel and their ability to develop
and market new products, services and software applications and to leverage
information delivery technologies.
WORKING CAPITAL PRACTICES
The Company invoices its information service clients in accordance with
agreed contract terms. Typical billing cycles are quarterly or monthly for
long-term contracts and payment is typically due within 30 days of receipt of
invoice. Software licenses generally require payment in full upon delivery of
software.
The Company pays certain retailers cash in accordance with negotiated terms
for providing scanner data for use in the InfoScan service. Payments to other
vendors are normally made in accordance with vendor terms.
CUSTOMERS
The Company had approximately 2,800, 2,900 and 2,400 clients using its
information services in 2000, 1999 and 1998, respectively. Most of the Company's
clients are CPG manufacturers in the United States or in other countries where
the Company offers its services. No client of the Company accounted for revenues
in excess of 10% of the Company's total revenues. The Company's top ten clients
accounted for approximately 32% of the Company's 2000 revenues.
BACKLOG ORDERS
At December 31, 2000, 1999 and 1998, the Company had committed contract
revenues for information services of approximately $594 million, $507 million
and $392 million, respectively. Backlog revenue to be earned in the immediate
year following December 31, 2000, 1999 and 1998 is $335 million, $228 million
and $200 million, respectively. Contracts generally have terms of three to five
years and not less than one year. Such contracts are generally categorized into
one of two classes: 1) cancelable at the end of each year by the giving of six
months written notice by either party, or 2) multi-year contracts either
non-cancelable or cancelable only with significant early termination fees,
generally by the giving of six months written notice after the initial
multi-year term. Committed contract revenues include only the non-cancelable
portion of a contract. Variations in the backlog relate to the timing of certain
contract renewals and expirations.
COMPETITION
Numerous firms supply marketing and advertising research products and
services to CPG manufacturers and retailers. However, the Company and ACNielsen
are the only two firms which provide national scanner-based product tracking
services in the United States to such manufacturers and retailers. In February
2001, VNU acquired the stock of ACNielsen resulting in a combined company that
has access to greater financial resources than the Company and is far larger
than IRI in terms of worldwide revenues. In the product tracking services
markets across Europe, ACNielsen currently maintains a larger market share in
all European countries and is the Company's only competitor. Principal
competitive factors include: data quality, reliability, timeliness and
comprehensiveness of analytical services and data; flexibility and innovation in
tailoring services
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to client needs; experience; the capability of technical and client service
personnel; data processing and decision support software; reputation and price.
From time to time, clients change their providers of product tracking
services. Competitive factors played a role in the Company's larger than normal
losses of certain significant U.S. clients in 1998 and 1999. In 2000, the
Company partially offset the previous year's client losses through the addition
of new clients and incremental sales to many existing clients. Due to the
relatively high fixed cost nature of the Company's database operation, erosion
of its revenue base could have a significant impact on profitability.
RESEARCH AND DEVELOPMENT
The Company is continuously developing new products and services. In this
regard, the Company is actively engaged in research and development of new
database analyses and applications, software applications and services and data
delivery systems. Expenditures for research and development for the years ended
December 31, 2000, 1999 and 1998 approximated $15.8 million, $16.9 million and
$18.8 million, respectively. All research and development expenditures were
expensed as incurred.
PERSONNEL
At December 31, 2000, the Company had approximately 4,000 full-time and
2,400 part-time employees worldwide. Effective January 1, 2001, in connection
with the Company's joint venture with Mosaic Group, Inc., Mosaic InfoForce, L.P.
hired approximately 200 full-time and 1,700 part-time employees from IRI. The
Company depends to a significant extent on its skilled technical personnel. Its
future success will depend to a large degree upon its ability to continue to
hire, train and retain its professional staff.
ITEM 2. PROPERTIES
The Company markets and provides its information services and software
support services to U.S. clients from full-service sales offices in Bentonville,
Arkansas; San Francisco and Los Angeles, California; Norwalk, Connecticut;
Atlanta, Georgia; Waltham, Massachusetts; Minneapolis, Minnesota; Fairfield, New
Jersey; Winston-Salem, North Carolina; Cincinnati, Ohio; Fort Washington,
Pennsylvania as well as from its corporate headquarters in Chicago, Illinois.
The Company markets to international clients through subsidiaries, joint
ventures and/or offices in Belgium, Canada, Cyprus, France, Germany, Guatemala,
Greece, Italy, Japan, Mexico, the Netherlands, Puerto Rico, Spain, United
Kingdom and Venezuela as well as through its various distributors.
Principal leased facilities of the Company are as follows:
APPROXIMATE
FLOOR AREA
LOCATION PRINCIPAL OPERATION (SQ. FT.)
- -------- ------------------- -----------
Chicago, IL............................ Corporate headquarters and offices for
professional staff 371,000
Wood Dale, IL.......................... Computer facilities 45,000
Regional sales and client service
offices.............................. Sales, client service and analysis 259,000
International offices.................. Sales, client service, computer
facilities and professional staff 269,000
Data collection facilities............. Data collection and client test market
control and cable TV studio facilities 79,000
ITEM 3. LEGAL PROCEEDINGS
On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp.,
The A.C. Nielsen Company (now a subsidiary of ACNielsen) and IMS International,
Inc. (collectively, the "Defendants") in the United States District Court for
the Southern District of New York entitled Information Resources, Inc. v. The
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Dun & Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged
that, among other things, the Defendants violated Sections 1 and 2 of the
Sherman Act, 15 U.S.C. Sections 1 and 2, by engaging in a series of
anti-competitive practices aimed at excluding the Company from various export
markets for retail tracking services and regaining monopoly power in the United
States market for such services. These practices included: i) entering into
exclusionary contracts with retailers in several countries, in order to restrict
the Company's access to sales data necessary to provide retail tracking
services; ii) illegally tying/bundling services in markets over which
Defendants' had monopoly power with services in markets in which ACNielsen
competed with the Company; iii) predatory pricing; iv) acquiring foreign market
competitors with the intent of impeding the Company's efforts at export market
expansion; v) tortiously interfering with Company contracts and relationships
with clients, joint venture partners and other market research companies; and
vi) disparaging the Company to financial analysts and clients. By the Action,
the Company sought to enjoin the Defendants' anti-competitive practices and to
recover damages in excess of $350 million, prior to trebling. On July 13, 2000,
the District Court in a procedural ruling held that IRI lacked standing to
assert claims for injury suffered from Defendants' activities in foreign markets
where IRI operates through subsidiaries or companies owned by joint ventures and
dismissed such claims. On February 6, 2001, the Court denied IRI leave to join
its subsidiaries as parties to assert such claims for injury concluding that it
lacked subject matter jurisdiction under the Sherman Act. IRI is currently
weighing its options concerning claims for injury suffered by IRI or its
subsidiaries in markets outside the United States.
On January 15, 1999, IRI filed an action against Manugistics, Inc.
("Manugistics") in the Circuit Court of Cook County, Illinois, Case No. 99 L
00599. In Count I of its two count action, IRI has alleged that Manugistics has
breached a Data Marketing and Guaranteed Revenue Agreement between IRI and
Manugistics ("Agreement") by failing to pay certain amounts due to IRI
thereunder. The Agreement was entered into by IRI and Manugistics in connection
with the sale by IRI to Manugistics of certain assets relating to the
manufacture, sale and servicing of certain logistics software. IRI has also
alleged that Manugistics committed an anticipatory breach of the Agreement with
respect to certain other amounts not yet due thereunder. IRI now seeks damages
in excess of $15.0 million in connection with these claims. In Count II, IRI has
alleged that Manugistics breached a related Non-Competition and Non-Solicitation
agreement between IRI and Manugistics (the "Non-Competition Agreement"). IRI
seeks unspecified damages to be determined at trial under this count. On March
2, 1999, Manugistics filed a Motion to Stay Proceedings and Compel Arbitration.
IRI agreed to arbitrate all claims related to the Agreement and filed an
arbitration demand before the American Arbitration Association on July 9, 1999.
The Arbitrator scheduled the arbitration to commence on November 5, 2001. IRI's
claims against Manugistics for breach of the Non-Competition Agreement remain
pending before the Circuit Court. Manugistics denies that it owes IRI any
damages, claiming a failure of consideration. IRI vigorously disputes this
assertion.
In the ordinary course of business, IRI and its subsidiaries become
involved as plaintiffs or defendants in various other legal proceedings. The
claims and counterclaims in such litigation, including those for punitive
damages, individually in certain cases and in the aggregate, involve amounts
which may be material. However, it is the opinion of the Company's management,
based upon the advice of counsel, that the ultimate disposition of pending
litigation against the Company will not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT
POSITION WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
- ---- --- -----------------------
Joseph P. Durrett.......................... 55 Chairman of the Board of Directors, Chief Executive
Officer and President of the Company since May
1999. President and Chief Executive Officer of
Broderbund Software, Inc. from October 1996 to
December 1998. Member of the Board of Directors of
Broderbund Software, Inc. from October 1996 to
September 1998. President, Chief Operating Officer
and Director of Advo, Inc. from September 1992 to
July 1996. Member of the Board of Directors of
Children's Miracle Network since 1990.
Andrew G. Balbirer......................... 46 Executive Vice President and Chief Financial
Officer of the Company since February 2000. Chief
Executive Officer of Arkidata Corporation from
October 1999 until February 2000. Independent
Consultant from April 1998 to October 1999.
Executive Vice President and Chief Operating
Officer of Metz Baking Company (a division of
Specialty Foods Corporation) from February 1996 to
April 1998. Chief Executive Officer of Mother's
Cake & Cookie Company (a division of Specialty
Foods Corporation) from July 1995 to February 1996.
Chief Financial Officer of Specialty Foods
Corporation from February 1995 to February 1996.
Prior to 1995, Mr. Balbirer served in various
senior management positions, including Chief
Financial Officer and General Manager of Consumer
Products with The NutraSweet Company, then a
wholly-owned subsidiary of Monsanto Company.
Edward C. Kuehnle.......................... 47 Group President of IRI North America since November
1999. Division President of Customer Sales and
Service from October 1998 to November 1999. Vice
President of Sales of Pharmacia & Upjohn Consumer
Healthcare from January 1998 to September 1998.
Manager of Strategic Services Group of Coopers &
Lybrand Consulting, LLP from January 1997 to
January 1998. Senior Vice President of Consumer &
Medical Sales of Whitehall Robins Healthcare (a
division of American Home Products Corp.) from July
1995 to October 1996. Executive Vice President of
Marketing & Sales of American Home Foods (a
division of American Home Products Corp.) from July
1994 to July 1995. Senior Vice President of Sales
of American Home Foods from July 1993 to July 1995.
Prior to July 1993, Mr. Kuehnle served in various
senior management sales, marketing, and supply
chain positions at Bristol-Myers Squibb Company.
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POSITION WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
- ---- --- -----------------------
Timothy Bowles............................. 57 Group President of International Operations of the
Company since May 1999. President of European
Operations from May 1995 to May 1999. Chief
Executive Officer of The MRB Group (a division of
WPP Group, plc, an international research supplier)
from 1987 to May 1995.
Monica M. Weed............................. 40 Executive Vice President and General Counsel of the
Company since November 1998. Corporate Secretary
since February 2000. Assistant Secretary from May
1993 to February 2000. Senior Vice President and
Assistant General Counsel of the Company from
December 1994 to November 1998. Vice President of
the Company from September 1991 to December 1994.
Mary K. Sinclair........................... 37 Executive Vice President and Corporate Controller
of the Company since June 2000. Corporate
Controller of Favorite Brands International, Inc.
from January 1999 to May 2000. Chief Financial
Officer of Federated Group, Inc. from 1996 to 1999.
All of the foregoing executive officers hold office until the next annual
meeting of the Board of Directors and until their successors are elected and
qualified.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S MATTERS
The Company's Common Stock has traded on the NASDAQ Stock Market under the
symbol "IRIC" since 1983. The stock currently trades on the National Market
System. Share data has been adjusted for all stock splits and stock dividends to
date.
The high and low closing sales prices for the Company's Common Stock were
as follows:
QUARTERS HIGH LOW
-------- ---- ---
1999
1st quarter............................................... $11.000 $6.438
2nd quarter............................................... 9.628 6.875
3rd quarter............................................... 11.750 7.688
4th quarter............................................... 12.000 8.125
2000
1st quarter............................................... $ 9.094 $5.969
2nd quarter............................................... 7.875 3.531
3rd quarter............................................... 7.375 4.000
4th quarter............................................... 6.875 2.875
The last sale price on February 28, 2001 was $5.50 per share. As of
February 28, 2001 there were 1,638 record holders of the Company's Common Stock.
The Company has never paid cash dividends. It is the present policy of the
Company's Board of Directors to retain earnings for use in the Company's
business. Accordingly, the Board of Directors does not anticipate that cash
dividends will be paid in the foreseeable future. There are restrictions in
IRI's bank revolving credit facility and certain lease agreements which limit
the payment of dividends and the purchases or redemption of Common Stock. (See
Note 9 of the Notes to the Consolidated Financial Statements.)
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ITEM 6. SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31,
------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
HISTORICAL RESULTS OF OPERATIONS(1)
Revenue........................................... $530.9 $546.3 $511.3 $456.3 $405.6
====== ====== ====== ====== ======
Restructuring and other charges(2) (3) (4)........ $(13.6) $(24.8) $ -- $ -- $ (4.8)
====== ====== ====== ====== ======
Defined contribution plan expense(5).............. $ -- $ (7.9) $ -- $ -- $ --
====== ====== ====== ====== ======
Operating profit (loss)........................... $(12.3) $(32.6) $ 7.0 $ 14.8 $ (5.1)
====== ====== ====== ====== ======
Net loss on sale of assets(6)..................... $ -- $ -- $ -- $ -- $ (4.6)
====== ====== ====== ====== ======
Net earnings (loss)............................... $ (7.5) $(18.4) $ 3.8 $ 7.7 $ (7.6)
====== ====== ====== ====== ======
Net earnings (loss) per common share -- basic..... $ (.26) $ (.66) $ .13 $ .27 $ (.27)
====== ====== ====== ====== ======
Weighted average common shares -- basic........... 29.0 28.0 28.6 28.5 27.8
====== ====== ====== ====== ======
Net earnings (loss) per common and common
equivalent share -- diluted..................... $ (.26) $ (.66) $ .13 $ .26 $ (.27)
====== ====== ====== ====== ======
Weighted average common and common equivalent
shares -- diluted............................... 29.0 28.0 29.0 29.1 27.8
====== ====== ====== ====== ======
BALANCE SHEET DATA(1)
Total assets...................................... $365.2 $368.5 $369.3 $366.6 $334.5
====== ====== ====== ====== ======
Working capital................................... $(15.2) $(11.1) $ 5.2 $ 24.9 $ 34.6
====== ====== ====== ====== ======
Long-term debt.................................... $ 24.6 $ 10.8 $ 4.6 $ .6 $ 7.9
====== ====== ====== ====== ======
Stockholders' equity.............................. $213.1 $225.0 $238.5 $241.5 $226.3
====== ====== ====== ====== ======
Book value per common share....................... $ 7.33 $ 7.74 $ 8.56 $ 8.41 $ 8.12
====== ====== ====== ====== ======
Dividends paid per common share................... $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ======
ADDITIONAL FINANCIAL INFORMATION(1)
Deferred data procurement costs................... $124.8 $130.2 $120.5 $111.8 $ 98.0
====== ====== ====== ====== ======
Capital expenditures.............................. $ 19.8 $ 31.1 $ 33.7 $ 34.4 $ 18.8
====== ====== ====== ====== ======
- ---------------
(1) In 1997, the Company and GfK formed a new company, IRI/GfK Retail, of which
the Company has a 51% ownership interest. IRI/GfK Retail purchased the
German retail tracking business of GfK Panel. In 1999, the Company's funding
requirements per the joint venture agreement increased to 80%.
In 1998, the Company executed a joint venture agreement relating to the
newly formed start-up venture in Spain ("IRI-Spain"), resulting in a 60%
ownership interest. The Company currently owns 65% of IRI-Spain.
In 1998, the Company increased its ownership from 19.9% to 51% and
subsequently to 80% in 1999 in a joint venture which offers a retail
tracking service to the Netherlands market. In addition, effective in 1998,
the Company reduced its ownership of Information Resources Japan, Ltd. from
60% to 40%.
The consolidation of the various international entities above did not have a
material impact on the consolidated financial results or position of the
Company.
(2) During 2000, the Company recorded charges aggregating $14.5 million relating
to its restructuring program and ($0.9) million relating to other charges.
(See Note 4 of the Notes to Consolidated Financial Statements).
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(3) In December 1999, the Company recorded a $19.7 million charge relating to
its restructuring program and a $5.1 million charge resulting from asset
impairments, primarily goodwill at IRI/GfK Retail. (See Note 4 of the Notes
to Consolidated Financial Statements).
(4) The $4.8 million other charge in 1996 principally related to the disposal of
certain cable TV advertising cut-in equipment originally developed for use
in the Company's market testing operation.
(5) In December 1999, the Company adopted the Information Resources, Inc.
Nonqualified Defined Contribution Plan (the "Plan"). In December 1999, the
Company made an irrevocable contribution of 877,000 shares of IRI common
stock to the Plan trust, resulting in the $7.9 million charge above which
represents the fair market value of the common stock contribution. (See Note
1 of the Notes to Consolidated Financial Statements).
(6) In December 1996, the Company recorded a $4.6 million charge primarily for
the final settlement of the escrow account related to the sale of a portion
of the Company's software business to Oracle in 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Overview: The Company's market is very competitive and revenue growth is
achieved primarily through the offering of new products and services. Revenues
are also affected in any given year by the net effect of client gains and
losses. The impact of client gains and losses has a somewhat delayed effect on
reported revenues in the Company's consolidated financial statements. This
lagging effect is due to the long-term nature of many contracts and the fact
that there is generally a period of transition between the date a client makes a
contract decision and the effective date of the agreement. In addition, because
of the relatively high fixed-cost component of the Company's database
operations, small variations in revenue can have a significant impact on
profitability.
In 1992, the Company began introducing its InfoScan tracking service into
Europe. Due to the inherent fixed cost nature of the business and the alleged
anticompetitive business practices and tactics of its major competitor,
ACNielsen, operating losses from the International Services business have been
significant to date. In December 1996, ACNielsen signed a three-year Undertaking
to the European Commission agreeing to halt numerous contractual practices which
the Company believes had hampered the Company's participation in European
markets. During the period that the Undertaking was in effect, the Company
believes that clients have benefitted from the Company's services without risk
of financial penalties being imposed by ACNielsen, and that a significant
artificial barrier to the Company's efforts to provide services to the European
markets was removed. The Company's International losses are declining as
revenues have increased in each of the Company's major European countries on a
local currency basis.
Operations: Consolidated revenues in 2000 decreased 2.8% over 1999 while
1999 revenues were 6.8% higher than 1998. 2000 net losses were $7.5 million
($0.4 million earnings before restructuring and other charges) compared to
losses of $18.4 million ($1.2 million earnings before defined contribution plan
expense and restructuring and other charges) in 1999 and $3.8 million in 1998.
The Company considers the aggregation of operating profit (loss), equity
earnings (losses) and minority interests ("Operating Results"), on a geographic
basis to be a meaningful measure of the Company's
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operating performance. A comparative analysis of consolidated revenues and
operating results for the years ended December 31, 2000, 1999 and 1998 follows
(in thousands):
2000 1999 1998
-------- -------- --------
Revenues:
U.S. Services....................................... $397,895 $416,729 $396,992
International Services.............................. 133,028 129,544 114,331
-------- -------- --------
Total.......................................... $530,923 $546,273 $511,323
======== ======== ========
Operating Results:
U.S. Services....................................... $ 15,833 $ 25,672 $ 31,515
International Services
Operating loss................................... (4,628) (13,709) (15,689)
Minority interests benefit....................... 2,746 4,256 342
Equity in earnings of affiliated companies....... 575 205 443
-------- -------- --------
Subtotal -- International Services............. (1,307) (9,248) (14,904)
Corporate and other expenses including equity in
loss of affiliated companies..................... (10,960) (11,848) (8,856)
Restructuring and other charges..................... (13,590) (24,755) --
Defined contribution plan expense................... -- (7,931) --
-------- -------- --------
Operating Results.............................. $(10,024) $(28,110) $ 7,755
======== ======== ========
Revenues from the Company's U.S. services business in 2000 were 4.5% lower
than in 1999, while revenues in 1999 increased 5.0% over 1998. The decline in
revenue in 2000 was primarily due to the delayed effect of 1999 client losses
partially offset by revenue from new clients in 2000 and additional revenues
from many existing clients. Certain client decisions in 1999 to not renew
business with IRI had a limited or no effect on the Company in 1999 because the
termination dates for such contracts occurred late in 1999 or in 2000. Factoring
out the delayed effect of 1999 client losses, 2000 U.S. revenues increased
approximately 5.6% over the prior year. The 1999 revenue increase versus 1998
was primarily due to expanded use of the Company's services and products from
its existing clients, particularly its retailer specific and panel databases, as
well as a full year of revenue from significant new clients won in 1998.
U.S. operating results before restructuring and other charges decreased
38.3% in 2000, due to the 4.5% decline in revenues partially offset by a 2.3%
decline in expenses. Expenses were reduced over the prior year primarily as a
result of the Project Delta cost reduction initiatives undertaken during 2000.
Expenses were lower for compensation and benefits and recruiting and office
expenses. However, the Company incurred certain other planned additional costs,
including the upgrade of its data center capacity, partially offsetting Project
Delta savings. U.S. operating results before restructuring and other charges and
defined contribution plan expense decreased 18.5% from 1998 to 1999 due to the
7.0% increase in expenses outpacing the 5.0% increase in revenues. The 1999
expense increase was driven by higher compensation costs and technical
consultants used for Y2K and other development activities, costs of the
multi-outlet panel expansion and costs of movement data for new categories and
channels.
Total International services revenues in 2000 increased 2.7%, 15% in local
currency, over 1999. Revenues in 1999 increased 13.3%, 18% in local currency,
over 1998. Operating results for the Company's International businesses
reflected a $1.3 million loss, an improvement of $7.9 million from the 1999 loss
of $9.2 million. Revenue growth continued in 2000 in the Company's major
European markets primarily in the U.K., France, Italy, Spain and the
Netherlands. Expense increases in 2000 of 8.0% on a local currency basis, and a
decline of $1.5 million in our minority partner's funding of German losses
during 2000, partially offset the favorable impact of revenue growth. The
International operating results were a $9.2 million loss in 1999 compared to a
$14.9 million loss in 1998. The 1999 reduced losses were principally due to the
continued European revenue growth primarily in the U.K., France and Italy.
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Year Ended December 31, 2000: Consolidated net losses were $7.5 million in
2000 compared to net losses of $18.4 million in 1999. The 2000 net loss
decreased primarily due to the decline in restructuring and other charges over
the prior year. Results in 2000 reflect an after tax charge of $8.2 million for
restructuring and other charges compared to $19.6 million in 1999. (See further
discussion of restructuring and other charges below.) The 2000 results reflect a
2.8% decrease in revenues, primarily due to the delayed impact of 1999 client
losses, offset by a 3.0% decrease in operating expenses primarily the result of
the Company's Project Delta cost reduction initiatives.
Consolidated revenues decreased 2.8% to $530.9 million in 2000. U.S.
revenues decreased 4.5% primarily due to the delayed effect of 1999 client
losses partially offset by revenue from new clients in 2000 and increased
revenues from existing clients. International revenues increased 2.7% over 1999
reflecting continued growth in the Company's European markets, primarily in the
U.K., France, Italy, Spain and the Netherlands. However, international revenue
growth in local currency was 15%, reflecting the strength of the U.S. dollar
versus European currencies.
Consolidated cost of information services sold decreased by $17.1 million,
or 3.5% to $474.2 million in 2000. The decrease is primarily attributable to
Project Delta cost reduction initiatives. These savings for the most part were
realized through reduced headcount and lower compensation and other employee
benefit costs. Additionally, the strength of the U.S. dollar versus European
currencies favorably impacted expenses.
Consolidated selling, general and administrative expenses increased by $0.5
million or 1.0% to $55.4 million for 2000.
Restructuring and other charges are discussed below.
Interest and other expenses were $3.6 million for 2000 compared to $1.5
million in 1999. The increase in 2000 is due to a combination of increased bank
borrowings, primarily to fund cash restructuring charges, as well as foreign
currency losses. The Company's 2000 income tax benefit was higher than the
income tax rates computed using the U.S. Federal statutory rate primarily due to
the effects of state income taxes.
Year Ended December 31, 1999: Consolidated net losses were $18.4 million in
1999 compared to net earnings of $3.8 million in 1998. Results in 1999 reflect
the $19.6 million after tax effect of restructuring and other charges and the
defined contribution plan expense. (See further discussion of restructuring
charges below.) In addition, the results reflect a decrease in operating
earnings in the Company's U.S. business caused by increased employee related
expenses, the multi-outlet panel expansion, Y2K related activities and costs of
new movement data for new categories.
Consolidated revenues increased 6.8% to $546.3 million in 1999. Revenues in
1999 reflect strong market share growth in Europe, specifically in the U.K.,
France and Italy. Revenue growth of 5% in the U.S. came from the expanded use of
the Company's products and services from existing accounts and the annualized
impact of accounts won in 1998, offset by the loss of certain accounts in late
1998 and 1999.
Consolidated cost of information services sold increased by $41.0 million,
or 9.1% to $491.2 million in 1999. Major components of the 1999 increase
included: (a) a $17.2 million increase in compensation expense resulting
primarily from salary and incentive pay increases in the U.S. and growing
European operations; (b) an $8.1 million increase in the amortization of
deferred data procurement costs, principally resulting from expansion of
information services businesses in Europe; and (c) a $7.0 million increase in
operating expenses due to field costs associated with category and channel
expansions.
Consolidated selling, general and administrative expenses increased by $0.8
million or 1.5% to $54.9 million for 1999. This increase was primarily
attributable to an increase in legal expenses related to the Company's antitrust
lawsuit against The Dun and Bradstreet Corporation, ACNielsen Company and IMS
International, Inc. The increased legal fees in 1999 were offset by a reduction
in costs principally related to severance, training and recruiting costs as
compared to 1998.
Defined contribution plan expense and restructuring and other charges are
discussed below.
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Interest and other expenses were $1.5 million for 1999 compared to $1.2
million in 1998. The increase in 1999 is due to a combination of increased
interest rates and bank borrowings as well as foreign currency losses. The
Company's 1999 income tax benefit was higher than the income tax rates computed
using the U.S. Federal statutory rate primarily due to the effects of state
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current cash resources include its $11.9 million consolidated
cash balance and $35.3 million available under the Company's bank revolving
credit facility. The Company anticipates that it will have sufficient funds from
these sources and internally generated funds from its U.S. operations to satisfy
its cash needs for the foreseeable future. The Company's bank credit agreement
contains covenants which restrict the Company's ability to incur additional
indebtedness.
Cash Flow for the Year Ended December 31, 2000: Consolidated net cash
provided by operating activities was $143.9 million for the year ended December
31, 2000 compared to $157.7 million in 1999. Although the net loss was lower in
2000, operating cash flow in 2000 included the funding of restructuring charges
accrued at the end of 1999. Consolidated cash used in net investing activities
was ($148.2) million in 2000 compared to ($165.2) million in 1999. Investing
activity in 2000 reflects lower expenditures for data procurement, capital and
software costs. These lower expenditures were partially offset by payments of
$3.8 million made in connection with the formation of Mosaic InfoForce, L.P. and
the Company's United Kingdom subsidiary's $0.9 million investment in Radar
Research Limited. Net cash used before financing activities was ($4.3) million
in 2000 and ($7.5) million in 1999. Consolidated cash provided by net financing
activities was $8.4 million in 2000 compared to $5.9 million in 1999. The
Company borrowed $11.0 million under its revolving line of credit during 2000
and purchased $0.9 million of the Company's stock compared to borrowings of $6.3
million and $1.2 million of stock purchases in 1999.
Cash Flow for the Year Ended December 31, 1999: Consolidated net cash
provided by operating activities was $157.7 million for the year ended December
31, 1999 compared to $159.8 million in 1998. While earnings were lower in 1999,
operating cash flow in 1999 reflected higher non-cash items, amortization and
depreciation, than in 1998. The increase in non-cash elements of operating
expense was offset by an increase in accounts receivable. Consolidated cash used
in net investing activities was ($165.2) million in 1999 compared to ($161.1)
million in 1998. Investing activity in 1999 reflects higher expenditures for
data procurement partially offset by lower capital expenditures. Net cash used
before financing activities was ($7.5) million in 1999 and ($1.2) million in
1998 primarily due to the higher investing activities in 1999. Consolidated cash
provided (used) by net financing activities was $5.9 million in 1999 compared to
($8.7) million in 1998. The Company borrowed $6.3 million under its revolving
line of credit during 1999 and during 1999 purchased $1.2 million of the
Company's stock compared to borrowings of $3.0 million in 1998 and $20.2 million
of stock purchases in 1998.
Financings: During October 2000, the Company amended certain financial
covenants and other terms and conditions of its $60 million bank revolving
credit facility. The amended facility has floating rate options at or below
prime and commitment fees of up to 0.5% payable on the unused portion. The
weighted average interest rate at December 31, 2000 was 8.27%.
The financial covenants in the bank credit agreement, as well as in the
lease agreement for the Company's Chicago headquarters, require the Company to
maintain a minimum tangible net worth and to meet certain cash flow coverage and
leverage ratios. The agreements also limit the Company's ability to declare
dividends or make distributions to holders of capital stock, or redeem or
otherwise acquire shares of the Company. Approximately $5.3 million is currently
available for such distributions under the most restrictive of these covenants.
The bank credit agreement contains covenants which restrict the Company's
ability to incur additional indebtedness. Further, the agreement grants the bank
a security interest in the Company's assets if certain financial covenants are
not met. As of December 31, 2000, the Company was in compliance with all
covenants.
Common Stock Repurchase Program: During 2000, the Company began acquiring
shares of its Common Stock in connection with a stock repurchase program
announced in August 2000 that was established to
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20
acquire shares to fund the Company's 2000 Employee Stock Purchase Plan. The
program, approved by the Company's Board of Directors, authorized the periodic
repurchase of up to one million shares of its Common Stock on the open market,
or in privately negotiated transactions, depending upon market conditions and
other factors. The Company purchased 158,700 shares of Common Stock aggregating
$0.9 million during 2000 at an average cost of $5.88 per share. On December 29,
2000, the Company sold 158,827 shares of Common Stock that were held in treasury
for $0.4 million to employees in connection with the Company's 2000 Employee
Stock Purchase Plan.
Other Deferred Costs: Consolidated deferred data procurement expenditures
were $124.8 million, $130.2 million and $120.5 million for the years ended
December 31, 2000, 1999 and 1998, respectively. These expenditures are amortized
over a period of 28 months and include payments to retailers for point-of-sale
data and costs related to collecting, reviewing and verifying other data (i.e.,
causal factors) which are an essential part of the Company's database. Deferred
data procurement expenditures for the Company's U.S. services business were
$74.7 million, $80.7 million and $76.9 million for the years ended December 31,
2000, 1999 and 1998, respectively. The decrease in deferred data procurement
expenditures was primarily due to lower retailer payments related to data for
the card panel that was discontinued in 1999 and the timing of retailer
payments. The Company's International services business deferred data
procurement expenditures were $50.1 million, $49.5 million and $43.6 million for
the years ended December 31, 2000, 1999 and 1998, respectively.
Capital Expenditures: Consolidated capital expenditures were $19.8 million,
$31.1 million, and $33.7 million for the years ended December 31, 2000, 1999 and
1998, respectively. Capital expenditures for the Company's U.S. services
business were $14.0 million, $25.7 million, and $28.3 million, while
depreciation expense was $25.2 million, $22.3 million and $18.3 million for the
years ended December 31, 2000, 1999 and 1998, respectively. Additionally, the
Company acquired mainframe computer equipment in exchange for a capital lease
obligation recorded at $7.4 million during the current year. The decrease in
capital spending from 1999 relates to the Company's acquisition of computer
equipment in 2000 through capital leases and higher spending in 1999 for
computer hardware and software required for Year 2000 compliance. The Company's
International services business capital expenditures were $5.8 million, $5.4
million and $5.4 million, while depreciation expense was $4.6 million, $4.7
million, and $4.9 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Consolidated capitalized software development costs, primarily in the U.S.,
were $1.6 million, $7.3 million and $7.2 million for the years ended December
31, 2000, 1999 and 1998, respectively. The decline in capitalized software costs
is primarily due to the Company's 1999 decision to discontinue all selling
activities relating to certain of IRI's internally developed trade promotion
software.
NOL & Tax Credit Carryforwards: As of December 31, 2000, the Company had
cumulative U.S. federal taxable net operating loss ("NOL") carryforwards of
$107.1 million which expire primarily in 2009, 2011 and 2020. At December 31,
2000 the Company also had U.S. tax credit carryforwards of $6.7 million, $5.5
million of which expire between 2002 and 2012, and the remainder of which can be
carried forward indefinitely. Certain of these carryforwards have not been
examined by the Internal Revenue Service and, therefore, are subject to
potential adjustment. In addition, at December 31, 2000, various foreign
subsidiaries of IRI had aggregate foreign taxable NOL carryforwards, which had
not been deducted in the U.S. tax returns, of $0.9 million which expire in 2009
and 2010.
The Company has reduced its deferred tax liability by its U.S. federal and
state NOL carryforwards and certain foreign NOL carryforwards in its
consolidated financial statements. The Company expects to realize these future
tax benefits primarily from future recognition of substantial taxable income
resulting from the reversal of $164.7 million of existing net temporary
differences.
Impact of Inflation: Inflation has slowed in recent years, however the
Company's results of operations are impacted by rising prices given the labor
intensive nature of the business. To the extent permitted by competitive
conditions, the Company passes increased costs on to customers by adjusting
sales prices and, in the case of multi-year contracts, through consumer price
index provisions in such agreements.
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RESTRUCTURING AND OTHER CHARGES
Project Delta: In the third quarter of 1999, the Company initiated a
comprehensive program named Project Delta, the objective of which was to improve
productivity and operating efficiencies to reduce the Company's on-going cost
structure in its U.S. operations. The first phase of Project Delta included the
identification and assessment of potential operating efficiencies in the
Company's various U.S. functional areas and was completed in the fourth quarter
of 1999. As a result of the planned initiatives, the Company recorded a
restructuring charge of $19.7 million ($11.8 million after tax) in the fourth
quarter of 1999. The key components of the charge included (i) severance related
to planned staff reductions of approximately 10%, or 325, of the Company's
full-time U.S. and Corporate employees; (ii) asset write-offs related to
unprofitable activities that were discontinued; and (iii) the disposition of
excess office space. The cost reduction program implementation began in the
first quarter 2000. The Company realized cost savings from Project Delta in 2000
of approximately $30.0 million before the impact of certain other planned cost
increases.
A restructuring accrual was established in the fourth quarter of 1999 to
reflect the outstanding obligations related to the fourth quarter 1999
restructuring charges. Certain restructuring costs were not eligible for accrual
in 1999 in accordance with EITF Issue No. 94-3 and were recorded during 2000.
The following tables reflect restructuring and other charges incurred during
2000 and 1999 and all cash payments made to date (in thousands):
2000 ACTIVITY
LIABILITY AT --------------------------------- LIABILITY AT
DECEMBER 31, 1999 PROVISION CASH NON-CASH DECEMBER 31, 2000
----------------- --------- -------- -------- -----------------
RESTRUCTURING CHARGES
Termination benefits........... $ 8,391 $ 3,649 $(10,011) $ -- $2,029
Discontinued activities........ -- 3,443 (1,302) (1,600) 541
Disposition of excess office
space....................... 494 557 (534) (517) --
Transition of German production
to U.S. facilities.......... -- 4,680 (4,680) -- --
Other costs of project......... -- 2,168 (2,168) -- --
OTHER CHARGES.................... -- (907) 907 -- --
------- ------- -------- ------- ------
$ 8,885 $13,590 $(17,788) $(2,117) $2,570
======= ======= ======== ======= ======
1999 ACTIVITY
-------------------------------- LIABILITY AT
PROVISION CASH NON-CASH DECEMBER 31, 1999
--------- ------- -------- -----------------
RESTRUCTURING CHARGES
Termination benefits.......................... $ 8,391 $ -- $ -- $8,391
Discontinued activities....................... 8,631 -- (8,631) --
Disposition of excess office space............ 1,498 -- (1,004) 494
Other costs of project........................ 1,130 (1,130) --
OTHER CHARGES................................... 5,105 -- (5,105) --
------- ------- -------- ------
$24,755 $(1,130) $(14,740) $8,885
======= ======= ======== ======
RESTRUCTURING CHARGES
Termination Benefits: In the fourth quarter of 1999, the Company decided to
terminate approximately 325 full-time positions during 2000 impacting virtually
all areas of the U.S. business, including operations, client services,
technology and marketing, as well as corporate headquarters. The Company
recorded a charge of $8.4 million in 1999 for termination benefits as
communications of such benefits had been made to affected employees. Additional
provisions of $3.6 million have been made in 2000 to cover retention and
relocation incentive costs that were not eligible for accrual at December 31,
1999. As of December 31, 2000, 336 employees have been terminated under various
Project Delta initiatives.
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Discontinued Activities: During 2000, the Company ceased operations of
entities in Japan (IRI Apollo K.K.) and Australia (Information Resources
Australia Pty, Ltd.) which were responsible for distributing Apollo software.
The Company has entered into agreements with its 40% owned affiliate,
Information Resources Japan Ltd. and an unrelated company in Australia to
distribute its Apollo software. In connection with the cessation of local
operations, the Company incurred charges of $0.7 million and $1.0 million
relating to the Japan and Australia businesses, respectively. During the third
quarter of 2000, it was determined that certain equipment used in the Company's
U.S. operations to collect retail information will no longer be utilized after
the second quarter of 2001. Accordingly, the Company recognized a non-cash
charge of $2.0 million in 2000 relating to accelerated depreciation on this
equipment.
In 1999, the Company wrote off $8.6 million of assets related to
discontinued activities of the U.S. business. This charge consisted of $4.8
million and $3.8 million relating to certain of the Company's trade promotion
software applications and Card Panel database assets, respectively. The Company
decided to discontinue all selling activities related to its internally
developed trade promotion software based on discounted future cash flow
estimates. As a result of this decision, the net book value of the trade
promotion software assets was written off in the fourth quarter of 1999. The
Company's consumer panel business had consisted of 55,000 households that
utilize hand-held scanners to record their product purchases ("Multi-outlet")
and shoppers from approximately 60,000 households that present an identification
card when shopping at participating grocery stores ("Card Panel"). In 1999, the
Company determined that the need for a Multi-outlet panel was becoming the
minimum standard for panel tracking services. As a result, the Company decided
to continue to expand its Multi-outlet panel and eliminate the separate Card
Panel service. The net book value of the Card Panel database asset was written
off in the fourth quarter of 1999. The Company continues to collect consumer
panel information from approximately 23,000 households via an identification
card for limited use in connection with the Company's Behavior Scan testing
service in the U.S.
Disposition of Excess Office Space: As a result of planned headcount
reductions and space not currently utilized, office space was reduced. The
Company recorded $0.6 million and $1.5 million of charges in 2000 and 1999,
respectively, relating to accelerated depreciation on leasehold improvements and
furniture and fixtures and lease buyouts associated with these facilities.
Transition of German Production to U.S. Facility: The Company made a
decision in the fourth quarter of 1999 to transfer production services for
IRI/GfK Retail from an external vendor in Germany to the Company's U.S.
headquarters facility in order to enhance its InfoScan offering in Germany and
to reduce future production costs. During 2000, charges of approximately $4.7
million were recorded related to this transition.
Other Restructuring Costs: Other restructuring costs relate primarily to
fees paid to the Boston Consulting Group for assistance in the identification
and execution of the Project Delta objectives.
Future Restructuring Charges: The Company's U.S. Project Delta cost
reduction program is nearing completion. However, the Company expects to incur
additional costs in 2001 of $7.0 million to $9.0 million relating to Project
Delta which could not be accrued as of December 31, 2000. Further, International
Project Delta initiatives will be undertaken during 2001 at a significantly
lower cost than the U.S. Project Delta program. Additionally, the Company has
begun an initial review of its information technology operations to assess
potential restructuring costs and benefits. The Company cannot yet estimate the
costs for these future restructuring programs.
OTHER CHARGES
Asset Impairments: In the fourth quarter of 1999, Restructuring and Other
Charges included a $0.9 million charge for a non-current receivables reserve.
This reserve was reversed during 2000 pursuant to a settlement agreement reached
with the other party.
During 1999 the Company determined, based on an analysis of undiscounted
future cash flows, that goodwill relating to IRI/GfK Retail was impaired,
resulting in a $4.2 million charge which was included in Restructuring and Other
Charges in the Statement of Operations. The Company made a decision in the
fourth
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quarter of 1999 to transfer production of IRI/GfK Retail from an external vendor
in Germany to the U.S. headquarters facility in order to enhance its InfoScan
offering in Germany and to reduce future production costs.
Nonqualified Defined Contribution Plan: In December 1999, the Company
adopted the Information Resources, Inc. Nonqualified Defined Contribution Plan
(the "Plan"). The Plan was designed to provide designated employees of the
Company with an ownership interest in the equity of IRI in order to align the
interests of those employees with the interests of IRI shareholders and
compensate employees for their past performance. In December 1999, as part of
the Plan, the Company made an irrevocable contribution of 877,000 shares of IRI
common stock to the Plan trust; all shares have been fully allocated to each
individual participant's account. This has resulted in the Company recording an
expense of $7.9 million in the fourth quarter of 1999 which represents the fair
market value of the common stock contribution. The shares of common stock will
vest and generally be distributable on the fourth anniversary of the date upon
which such shares are allocated to the participant's account if the
participant's employment with the Company has not been terminated, with certain
exceptions for termination of employment due to retirement, disability, death or
change in control. Forfeited shares will remain in the Plan and be reallocated
to other participants. Of the $7.9 million expensed in 1999, $5.5 million, $2.1
million and $0.3 million relate to the U.S. Services, International Services,
and Corporate segments of the business, respectively.
EUROPEAN CURRENCY CONVERSION ISSUES
In accordance with the 1992 treaty of the European Union, on January 1,
1999, a new single European currency, the Euro, became legal tender. The Euro
will replace the sovereign currencies ("legacy currencies") of eleven members of
the European Union ("participating countries"). On this date, fixed conversion
rates between the Euro and the legacy currencies in those particular countries
were established.
As the Company has operations in several of the participating countries, it
will be affected by issues relating to the introduction of and transition to the
Euro. The Company's European Executive Committee is charged with formulating and
executing all aspects of the Company's plan concerning the conversion to the
Euro.
The Company does not expect the cost of any system modifications to be
material or result in any material increase in transaction costs. The Company
will continue to evaluate the impact of the Euro, however, based on currently
available information, management does not believe the introduction of the Euro
will have a material adverse impact on the Company's financial condition or
overall trends in results of operations.
FORWARD LOOKING INFORMATION
All statements other than statements of historical fact made in this Annual
Report on Form 10-K are forward looking. In particular, statements regarding
industry prospects, our future results of operations or financial position, and
statements preceded by, followed by or that include the words "intends,"
"estimates," "believes," "expects," "anticipates," "should," "could," or similar
expressions, are forward-looking statements and reflect our current expectations
and are inherently uncertain. The Company's actual results may differ
significantly from our expectations for a number of reasons, including risks and
uncertainties relating to customer renewals of service contracts, the timing of
significant new customer engagements, the success of implementing Project Delta
and future restructuring programs, competitive conditions, the potential for
future client losses, changes in client spending for the non-contractual
services the Company offers, the success of technology alternatives currently
being developed or implemented by the Company to provide access to Company data,
other technology changes that may impact Company services, foreign currency
exchange rates, European currency conversion issues and other factors beyond the
Company's control. These risks and uncertainties are described herein and in
reports and other documents filed by the Company with the Securities and
Exchange Commission.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the consolidated
financial position, results of operations or cash flows of the Company due to
adverse changes in financial rates. The Company is exposed to market risk in the
area of foreign exchange and interest rates.
Foreign Currency Exchange Rates: The Company operates and conducts business
in several foreign countries, primarily in Europe, and as a result is exposed to
movements in foreign exchange rates. Exchange rate movements upon consolidation
of the foreign subsidiaries for which the functional currency is not the U.S.
dollar could impact the Company's revenues, expenses and equity. The Company's
net earnings are also exposed to exchange rate movements relating to certain
intercompany transactions between the U.S. and foreign subsidiaries. The Company
does not use derivative financial instruments to manage changes in foreign
currency exchange rates.
Interest Rate Risk: A 1% fluctuation in interest rates would not have a
significant impact on the operating results of the Company. The Company does not
currently maintain any interest rate hedge agreements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Listed below are the financial statements and supplementary data included
in this part of the Annual Report on Form 10-K:
PAGE
NO.
----
(a) Financial Statements
Report of Independent Auditors.............................. 24
Consolidated Balance Sheets at December 31, 2000 and 1999... 25
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998............................ 26
Statement of Changes in Stockholders' Equity and
Comprehensive Income for the years ended December 31, 2000,
1999 and 1998............................................... 27
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998............................ 28
Notes to Consolidated Financial Statements.................. 29
(b).. Supplementary Data
Summary of Quarterly Data................................... 45
Financial statement schedule is included on page 47 preceding the signature
page of this report (see Item 14).
23
25
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Information Resources, Inc.
We have audited the accompanying consolidated balance sheets of Information
Resources, Inc. and Subsidiaries as of December 31, 2000 and 1999 and the
related consolidated statements of operations, changes in stockholders' equity
and comprehensive income and cash flows for each of the three years in the
period ended December 31, 2000. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Information
Resources, Inc. and Subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
February 7, 2001
24
26
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
--------------------
2000 1999
--------- --------
(IN THOUSANDS)
CURRENT ASSETS
Cash and cash equivalents................................. $ 11,914 $ 8,077
Accounts receivable, net.................................. 80,610 94,125
Prepaid expenses and other................................ 11,009 8,569
--------- --------
Total Current Assets................................. 103,533 110,771
--------- --------
Property and equipment, at cost............................. 203,509 204,535
Accumulated depreciation.................................... (127,777) (123,550)
--------- --------
Net Property and Equipment........................... 75,732 80,985
Deferred income taxes....................................... 4,031 --
Investments................................................. 15,858 9,624
Other assets................................................ 166,006 167,100
--------- --------
$ 365,160 $368,480
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of capitalized leases.................. $ 2,337 $ 55
Accounts payable.......................................... 53,360 49,616
Accrued compensation and benefits......................... 22,609 23,838
Accrued property, payroll and other taxes................. 1,980 4,813
Accrued expenses.......................................... 11,372 11,475
Accrued restructuring costs............................... 2,570 8,885
Deferred revenue.......................................... 24,487 23,163
--------- --------
Total Current Liabilities............................ 118,715 121,845
--------- --------
Long-term debt.............................................. 24,628 10,764
Deferred income taxes....................................... -- 2,269
Other liabilities........................................... 8,686 8,627
STOCKHOLDERS' EQUITY
Preferred stock -- authorized 1,000,000 shares, $.01 par
value; none issued..................................... -- --
Common stock-- authorized 60,000,000 shares, $.01 par
value; 29,069,892 and 29,068,657 shares issued and
outstanding, respectively.............................. 294 291
Additional paid-in capital................................ 198,926 198,863
Retained earnings......................................... 23,852 31,390
Accumulated other comprehensive loss...................... (9,941) (5,569)
--------- --------
Total Stockholders' Equity........................... 213,131 224,975
--------- --------
$ 365,160 $368,480
========= ========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
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27
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Information services revenues.............................. $ 530,923 $ 546,273 $ 511,323
Costs and expenses:
Information services sold (excluding 1999 defined
contribution plan expense of $6,936)................ (474,190) (491,247) (450,236)
Selling, general and administrative expenses
(excluding 1999 defined contribution plan expense of
$995)............................................... (55,424) (54,911) (54,117)
Restructuring and other charges....................... (13,590) (24,755) --
Defined contribution plan expense..................... -- (7,931) --
--------- --------- ---------
(543,204) (578,844) (504,353)
--------- --------- ---------
Operating profit (loss).................................. (12,281) (32,571) 6,970
Interest expense and other, net.......................... (3,639) (1,452) (1,174)
Equity in earnings (loss) of affiliated companies........ (489) 205 443
Minority interests benefit............................... 2,746 4,256 342
--------- --------- ---------
Earnings (loss) before income taxes...................... (13,663) (29,562) 6,581
Income tax (expense) benefit............................. 6,125 11,174 (2,735)
--------- --------- ---------
Net earnings (loss)...................................... $ (7,538) $ (18,388) $ 3,846
========= ========= =========
Net earnings (loss) per common share -- basic............ $ (0.26) $ (0.66) $ 0.13
========= ========= =========
Net earnings (loss) per common and common equivalent
share -- diluted...................................... $ (0.26) $ (0.66) $ 0.13
========= ========= =========
Weighted average common shares -- basic.................. 29,034 28,045 28,578
========= ========= =========
Weighted average common and common equivalent shares --
diluted............................................... 29,034 28,045 28,986
========= ========= =========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
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28
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31,
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE TOTAL
COMMON PAID-IN RETAINED INCOME STOCKHOLDERS'
STOCK CAPITAL EARNINGS (LOSS) EQUITY
------ ---------- -------- ------------- -------------
(IN THOUSANDS)
Balance at December 31, 1997........... $287 $198,537 $ 45,932 $(3,214) $241,542
---- -------- -------- ------- --------
Comprehensive income:
Net earnings......................... -- -- 3,846 -- 3,846
Other comprehensive income, foreign
currency translation adjustment... -- -- -- 908 908
--------
Comprehensive income................. 4,754
Shares issued from employee stock
option plan exercises and other...... 6 9,398 -- -- 9,404
Shares purchased and retired........... (14) (17,234) -- -- (17,248)
---- -------- -------- ------- --------
Balance at December 31, 1998........... 279 190,701 49,778 (2,306) 238,452
---- -------- -------- ------- --------
Comprehensive income:
Net loss............................. -- -- (18,388) (18,388)
Other comprehensive loss, foreign
currency translation adjustment... -- -- -- (3,263) (3,263)
--------
Comprehensive loss................... (21,651)
Restricted stock granted............... 3 361 -- -- 364
Shares issued to Defined Contribution
Plan................................. 9 7,922 -- -- 7,931
Shares issued from employee stock
option plan exercises and other...... 1 1,103 -- -- 1,104
Shares purchased and retired........... (1) (1,224) -- -- (1,225)
---- -------- -------- ------- --------
Balance at December 31, 1999........... 291 198,863 31,390 (5,569) 224,975
---- -------- -------- ------- --------
Comprehensive income:
Net loss............................. -- -- (7,538) -- (7,538)
Other comprehensive loss, foreign
currency translation adjustment... -- -- -- (4,372) (4,372)
--------
Comprehensive loss................... -- -- -- -- (11,910)
Restricted stock granted............... -- 405 -- -- 405
Shares issued to Employee Stock
Purchase Plan........................ 2 445 -- -- 447
Shares issued to Board Directors and
other................................ 4 143 147
Shares purchased and retired........... (3) (930) -- -- (933)
---- -------- -------- ------- --------
Balance at December 31, 2000........... $294 $198,926 $ 23,852 $(9,941) $213,131
==== ======== ======== ======= ========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
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29
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................................... $ (7,538) $ (18,388) $ 3,846
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Amortization of deferred data procurement costs......... 119,831 120,227 112,111
Restructuring and other charges......................... (3,532) 23,625 --
Defined contribution plan expense....................... -- 7,931 --
Depreciation............................................ 29,775 26,968 23,238
Amortization of capitalized software costs and
intangibles.......................................... 6,082 7,295 6,894
Deferred income tax expense (benefit)................... (6,390) (11,571) 2,606
Equity in earnings of affiliated companies and minority
interests............................................ (2,257) (4,461) (785)
Other................................................... 525 (1,350) (2,864)
Change in assets and liabilities:
Accounts receivable, net............................. 13,425 (7,717) 9,615
Other current assets................................. (2,440) 655 560
Accounts payable and accrued liabilities............. (6,044) 7,688 3,147
Deferred revenue..................................... 1,324 1,223 1,471
Other, net........................................... 1,089 5,571 3
--------- --------- ---------
Net cash provided by operating activities.......... 143,850 157,696 159,842
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred data procurement costs........................... (124,840) (130,212) (120,493)
Purchase of property, equipment and software.............. (19,768) (31,142) (33,731)
Capitalized software costs................................ (1,635) (7,273) (7,167)
Investment in joint ventures.............................. (4,678) -- --
Proceeds from disposition of assets....................... 365 524 --
Capital contributions from minority interests and other,
net..................................................... 2,393 2,890 319
--------- --------- ---------
Net cash used by investing activities.............. (148,163) (165,213) (161,072)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net bank borrowings....................................... 11,000 6,281 3,000
Net repayments of capitalized leases...................... (2,124) (480) (810)
Purchases of Common Stock................................. (933) (1,225) (20,185)
Proceeds from exercise of stock options and other......... 447 1,299 9,256
--------- --------- ---------
Net cash provided (used) by financing activities... 8,390 5,875 (8,739)
EFFECT OF EXCHANGE RATE CHANGES ON CASH................... (240) (1,430) 193
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... 3,837 (3,072) (9,776)
Cash and cash equivalents at beginning of year............ 8,077 11,149 20,925
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 11,914 $ 8,077 $ 11,149
========= ========= =========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
28
30
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. SUMMARY OF ACCOUNTING POLICIES
BUSINESS
Information Resources, Inc. and its subsidiaries (collectively referred to
herein as "IRI" or the "Company") is a leading provider of universal product
code ("UPC"), scanner-based business solutions services to the consumer packaged
goods ("CPG") industry, offering services in the U.S., Europe and other
international markets. The Company supplies CPG manufacturers, retailers and
brokers with information and analysis critical to their sales, marketing and
supply chain operations. IRI provides services designed to deliver value through
an enhanced understanding of the consumer to a majority of the Fortune 500
companies in the CPG industry.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Information
Resources, Inc. and all wholly-or majority-owned subsidiaries. Minority
interests reflect the non-Company owned stockholder interests in IRI/GfK Retail
Services GmbH (Germany) ("IRI/GfK Retail"), Information Resources GfK B.V. (the
Netherlands) and Information Resources Espana, S.L. (Spain). The equity method
of accounting is used for investments in which the Company has a 20% to 50%
ownership interest because it exercises significant influence over operating and
financial policies. All significant intercompany accounts and transactions have
been eliminated in consolidation. The excess of the carrying value over the net
book value of investments accounted for using the equity method is amortized
over ten years.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results may differ from estimates.
REVENUE RECOGNITION
Revenues on contracts for retail tracking services, which generally have
terms of three to five years, are recognized over the terms of the contracts.
Such contracts are generally categorized into one of two classes: 1) cancelable
at the end of each year by the giving of six months written notice by either
party; or 2) multi-year contracts either non-cancelable or cancelable only with
significant penalties, generally by the giving of six months written notice
after the initial multi-year term. Revenues for special analytical services,
market research and consulting projects are recognized as services are
performed. Certain of these projects are fixed-price in nature and use the
percentage-of-completion method for the recognition of revenue.
Revenues from the sale of software application products, or products sold
under licensing agreements, are recognized upon delivery when there is a
reasonable basis for estimating collectibility and the Company has no
significant remaining obligations. Related software maintenance fees are
recognized as earned over the terms of their respective contracts.
RESEARCH AND DEVELOPMENT
The Company is continuously developing new products and services. In this
regard, the Company is actively engaged in research and development of new
database analyses and applications, software applications and services and data
delivery systems. Expenditures for research and development for the years ended
29
31
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2000, 1999 and 1998 approximated $15.8 million, $16.9 million and
$18.8 million, respectively. All research and development expenditures were
expensed as incurred.
BENEFITS PLANS
The Company sponsors an employee savings plan that qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. The plan
allows eligible employees to contribute a portion of their pre-tax income in
accordance with specified guidelines. The Company matches a percentage of
employee contributions up to certain limits. The expense recognized for the
401(k) plan totaled approximately $2.8 million, $3.0 million and $2.9 million in
2000, 1999 and 1998, respectively.
In December 1999, the Company adopted the Information Resources, Inc.
Nonqualified Defined Contribution Plan (the "Plan"). The plan was designed to
provide designated employees of the Company with an ownership interest in the
equity of IRI in order to align the interests of those employees with the
interests of IRI shareholders and compensate employees for their past
performance. In December 1999, as part of the Plan, the Company made an
irrevocable contribution of 877,000 shares of IRI common stock to the Plan
trust; all shares have been fully allocated to each individual participant's
account. This has resulted in the Company recording an expense of $7.9 million
in the fourth quarter of 1999 which represents the fair market value of the
common stock contribution. The shares of common stock will vest and generally be
distributable on the fourth anniversary of the date upon which such shares are
allocated to the participant's account if the participant's employment with the
Company has not been terminated, with certain exceptions for termination of
employment due to retirement, disability, death or change in control. Forfeited
shares will remain in the Plan and be reallocated to other participants. Of the
$7.9 million expensed in 1999, $5.5 million, $2.1 million and $0.3 million
relate to the U.S. Services, International Services, and Corporate segments of
the business, respectively.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and funds held in money market accounts with a maturity of three
months or less.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND CREDIT RISK
The carrying value of the Company's financial instruments, cash and cash
equivalents, investments and debt obligations represent a reasonable estimate of
their fair value. As of December 31, 2000 and 1999, the Company had no
significant concentrations of credit risk related to cash equivalents and
accounts receivable.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated over the
estimated service lives. For financial statement purposes, depreciation is
provided by the straight-line method. The Company also capitalizes the cost of
internal-use computer software as incurred and amortizes such costs over the
respective estimated useful lives in accordance with SOP 98-1. Leasehold
improvements are amortized over the shorter of their estimated service lives or
the terms of their respective lease agreements. Estimated useful lives are as
follows:
Computer equipment and software............................. 3 to 7 years
Market testing and other operating equipment................ 3 to 7 years
Leasehold improvements...................................... 4 to 20 years
Equipment and furniture..................................... 3 to 8 years
30
32
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER ASSETS
Other assets include deferred data procurement costs, intangible assets and
capitalized costs of software held for sale. Data procurement costs are
amortized over a period of 28 months and include payments and services to
retailers for point-of-sale data and costs related to collecting, reviewing and
verifying other data (i.e., causal factors) which are an essential part of the
database. Intangible assets include goodwill, solicitation rights and
non-compete agreements, all of which arose from acquisitions, investments or
strategic alliances. Goodwill is amortized on a straight-line basis over periods
from ten to twenty years. Solicitation rights are amortized on a straight-line
basis over the expected useful lives of six to ten years. Non-compete agreements
are being amortized over periods from five to seven years. The Company
capitalizes costs incurred for computer software to be sold in accordance with
Financial Accounting Standard No. 86. Capitalized costs of computer software
held for sale are amortized on a straight-line basis beginning upon the
software's general release date over a period not to exceed three years.
On an ongoing basis, management reviews the valuation and amortization of
these assets to determine possible impairment by comparing the carrying value to
the undiscounted future cash flows of the related assets. During 1999, the
Company wrote off certain assets as described in Note 4. Such charges were
classified as Restructuring and Other Charges in 1999 in the Statement of
Operations.
INCOME TAXES
Deferred income taxes are recognized at statutory rates to reflect the
future effects of tax carryforwards and temporary differences arising between
the tax bases of assets and liabilities and their financial reporting amounts at
each year end. Deferred income taxes arise in business combinations accounted
for as purchases as a result of differences between the fair value of assets
acquired and their tax bases.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of the Company's foreign
operations are measured using local currency as the functional currency. Assets
and liabilities have been translated into U.S. dollars at the rates of exchange
at the balance sheet date and revenues and expenses have been translated at
average exchange rates prevailing during the period. Translation gains and
losses are deferred as a separate component of stockholder's equity while
foreign currency transaction gains and losses are included in determining net
earnings.
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE AND STOCK-BASED
COMPENSATION
Net earnings (loss) per share is based upon the weighted average number of
shares of common stock outstanding during each year. Net earnings (loss) per
common and common equivalent share -- diluted is based upon the weighted average
number of shares of common stock and common stock equivalents, entirely
comprised of stock options, outstanding during each year. For the years ended
December 31, 2000 and 1999, all stock options, aggregating 8,704,117 shares and
7,451,373 shares, respectively, were excluded from the weighted average shares
outstanding calculation because they were anti-dilutive. For the year ended
December 31, 1998, stock options aggregating 3,256,904 shares were excluded from
the weighted average shares outstanding calculation because they were
anti-dilutive.
The Company accounts for stock option grants in accordance with provisions
of APB Opinion No. 25, "Accounting for Stock Issued to Employees."
31
33
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUPPLEMENTAL CASH FLOW INFORMATION
Interest expense paid and income taxes paid (refund received) during the
years ended December 31, were as follows (in thousands):
2000 1999 1998
------ ------ ------
Interest.................................................... $2,627 $1,731 $1,257
Income taxes................................................ (124) 418 1,548
Non-cash investing and financing activities are excluded from the
consolidated statements of cash flows. During 2000, the Company acquired
mainframe computer equipment in exchange for capital lease obligations recorded
at $7.4 million. The Company also capitalized $5.5 million as an investment
relating to the formation of the Mosaic InfoForce, L.P. joint venture. In 1999,
the Company contributed 877,000 shares of common stock with a fair market value
of $7.9 million to the IRI Nonqualified Defined Contribution Plan (See Note 1).
In 1998 receivables of $1.6 million were reclassified to investment in joint
ventures.
3. JOINT VENTURES
During 2000, the Company and Mosaic Group, Inc. organized a joint venture
company, Mosaic InfoForce, L.P. ("MIF"), in which the Company currently has a
49% ownership interest and Mosaic Group, Inc. owns the remainder. The Company's
domestic causal and custom audit data collection and merchandising business are
operated by MIF. The Company capitalized $7.4 million in connection with the
formation of MIF which is being accounted for using the equity method of
accounting.
4. RESTRUCTURING AND OTHER CHARGES
Project Delta: In the third quarter of 1999, the Company initiated a
comprehensive program named Project Delta, the objective of which was to improve
productivity and operating efficiencies to reduce the Company's on-going cost
structure in its U.S. operations. The first phase of Project Delta included the
identification and assessment of potential operating efficiencies in the
Company's various U.S. functional areas and was completed in the fourth quarter
of 1999. As a result of the planned initiatives, the Company recorded a
restructuring charge of $19.7 million ($11.8 million after tax) in the fourth
quarter of 1999. The key components of the charge included (i) severance related
to planned staff reductions of approximately 10%, or 325, of the Company's
full-time U.S. and Corporate employees; (ii) asset write-offs related to
unprofitable activities that were discontinued; and (iii) the disposition of
excess office space. The cost reduction program implementation began in the
first quarter of 2000.
A restructuring accrual was established in the fourth quarter of 1999 to
reflect the outstanding obligations related to the fourth quarter 1999
restructuring charges. Certain restructuring costs were not eligible for
32
34
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accrual in 1999 and were recorded during 2000. The following tables reflect
restructuring and other charges incurred during 2000 and 1999 and all cash
payments made to date (in thousands):
2000 ACTIVITY
LIABILITY AT --------------------------------- LIABILITY AT
DECEMBER 31, 1999 PROVISION CASH NON-CASH DECEMBER 31, 2000
----------------- --------- -------- -------- -----------------
RESTRUCTURING CHARGES
Termination benefits.......... $8,391 $ 3,649 $(10,011) $ -- $2,029
Discontinued activities....... -- 3,443 (1,302) (1,600) 541
Disposition of excess office
space...................... 494 557 (534) (517) --
Transition of German
production to U.S.
facilities................. -- 4,680 (4,680) -- --
Other costs of project........ -- 2,168 (2,168) -- --
OTHER CHARGES................... -- (907) 907 -- --
------ ------- -------- ------- ------
$8,885 $13,590 $(17,788) $(2,117) $2,570
====== ======= ======== ======= ======
1999 ACTIVITY
-------------------------------- LIABILITY AT
PROVISION CASH NON-CASH DECEMBER 31, 1999
--------- ------- -------- -----------------
RESTRUCTURING CHARGES
Termination benefits.......................... $ 8,391 $ -- $ -- $ 8,391
Discontinued activities....................... 8,631 -- (8,631) --
Disposition of excess office space............ 1,498 -- (1,004) 494
Other costs of project........................ 1,130 (1,130) -- --
OTHER CHARGES................................... 5,105 -- (5,105) --
------- ------- -------- -------
$24,755 $(1,130) $(14,740) $ 8,885
======= ======= ======== =======
RESTRUCTURING CHARGES
Termination Benefits: In the fourth quarter of 1999, the Company decided to
terminate approximately 325 full-time positions during 2000 impacting virtually
all areas of the U.S. business, including operations, client services,
technology and marketing, as well as corporate headquarters. The Company
recorded a charge of $8.4 million in 1999 for termination benefits as
communications of such benefits had been made to affected employees. Additional
provisions of $3.6 million have been made in 2000 to cover retention and
relocation incentive costs that were not eligible for accrual at December 31,
1999. As of December 31, 2000, 336 employees have been terminated under various
Project Delta initiatives.
Discontinued Activities: During 2000, the Company ceased operations of
entities in Japan (IRI Apollo K.K.) and Australia (Information Resources
Australia Pty, Ltd.) which were responsible for distributing Apollo software.
The Company has entered into agreements with its 40% owned affiliate,
Information Resources Japan Ltd. and an unrelated company in Australia to
distribute its Apollo software. In connection with the cessation of local
operations, the Company incurred charges of $0.7 million and $1.0 million
relating to the Japan and Australia businesses, respectively. During the third
quarter of 2000, it was determined that certain equipment used in the Company's
U.S. operations to collect retail information will no longer be utilized after
the second quarter of 2001. Accordingly, the Company recognized a non-cash
charge of $2.0 million in 2000 relating to accelerated depreciation on this
equipment.
In 1999, the Company wrote off $8.6 million of assets related to
discontinued activities of the U.S. business. This charge consisted of $4.8
million and $3.8 million relating to certain of the Company's trade promotion
software applications and Card Panel database assets, respectively. The Company
decided to
33
35
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
discontinue all selling activities related to its internally developed trade
promotion software based on discounted future cash flow estimates. As a result
of this decision, the net book value of the trade promotion software assets was
written off in the fourth quarter of 1999. The Company's consumer panel business
had consisted of 55,000 households that utilize hand-held scanners to record
their product purchases ("Multi-outlet") and shoppers from approximately 60,000
households that present an identification card when shopping at participating
grocery stores ("Card Panel"). In 1999, the Company determined that the need for
a Multi-outlet panel was becoming the minimum standard for panel tracking
services. As a result, the Company decided to continue to expand its
Multi-outlet panel and eliminate the separate Card Panel service. The net book
value of the Card Panel database asset was written off in the fourth quarter of
1999. The Company continues to collect consumer panel information from
approximately 23,000 households via an identification card for limited use in
connection with the Company's BehaviorScan testing service in the U.S.
Disposition of Excess Office Space: As a result of planned headcount
reductions and space not currently utilized, office space was reduced. The
Company recorded $0.6 million and $1.5 million of charges in 2000 and 1999,
respectively, relating to accelerated depreciation on leasehold improvements and
furniture and fixtures and lease buyouts associated with these facilities.
Transition of German Production to U.S. Facility: The Company made a
decision in the fourth quarter of 1999 to transfer production services for
IRI/GfK Retail from an external vendor in Germany to the Company's U.S.
headquarters facility in order to enhance its InfoScan offering in Germany and
to reduce future production costs. During 2000, charges of approximately $4.7
million were recorded related to this transition.
Other Restructuring Costs: Other restructuring costs relate primarily to
fees paid to the Boston Consulting Group for assistance in the identification
and execution of the Project Delta objectives.
OTHER CHARGES
In the fourth quarter of 1999, Restructuring and Other Charges included a
$0.9 million charge for a non-current receivables reserve. This reserve was
reversed during 2000 pursuant to a settlement agreement reached with the other
party.
During 1999, the Company determined that goodwill relating to IRI/GfK
Retail was impaired, resulting in a $4.2 million charge which was included in
Restructuring and Other Charges.
5. INCOME TAXES
As of December 31, 2000, the Company had cumulative U.S. federal taxable
net operating loss ("NOL") carryforwards of $107.1 million which expire
primarily in 2009, 2011 and 2020. At December 31, 2000, the Company also had
U.S. tax credit carryforwards of $6.7 million, $5.5 million of which expire
between 2002 and 2012, and the remainder of which can be carried forward
indefinitely. Certain of these carryforwards have not been examined by the
Internal Revenue Service and, therefore, are subject to potential adjustment.
A majority of the foreign pre-tax losses are deducted as partnership losses
in IRI's consolidated U.S. Federal income tax return. At December 31, 2000,
various foreign subsidiaries of IRI had aggregate foreign taxable NOL
carryforwards, which had not been deducted in the U.S. tax returns, of $0.9
million which expire in 2009 and 2010.
Domestic earnings (losses) before income taxes were ($10.0) million,
($28.9) million and $16.7 million for 2000, 1999 and 1998, respectively. The
foreign losses before income taxes were ($3.7) million, ($0.7) million and
($10.1) million for 2000, 1999 and 1998, respectively.
34
36
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax (expense) benefit relating to earnings (loss) for the years
ended December 31, 2000, 1999 and 1998 consisted of the following components (in
thousands):
2000 1999 1998
------ ------- -------
Current income tax expense
Federal................................................. $ -- $ -- $ --
Foreign................................................. (265) (397) (129)
State and local......................................... -- -- --
------ ------- -------
(265) (397) (129)
------ ------- -------
Deferred income tax (expense) benefit
Federal................................................. 4,357 9,562 (1,939)
Foreign................................................. 228 (593) 21
State and local......................................... 1,805 2,602 (688)
------ ------- -------
6,390 11,571 (2,606)
------ ------- -------
Income tax (expense) benefit.............................. $6,125 $11,174 $(2,735)
====== ======= =======
The Company has reduced its deferred tax liability by its U.S. federal and
state NOL carryforwards and certain foreign NOL carryforwards in its
consolidated financial statements. The Company expects to realize these future
tax benefits primarily from future recognition of substantial taxable income
resulting from the reversal of $164.7 million of existing net temporary
differences.
Significant components of the Company's deferred tax liabilities and assets
were as follows (in thousands):
DECEMBER 31,
-----------------
2000 1999
------- -------
Deferred tax liabilities:
Deferred data procurement costs........................... $53,820 $51,329
Capitalized software costs................................ 3,151 3,048
Acquisition related costs................................. 3,321 3,186
Other..................................................... 5,585 5,425
------- -------
Total deferred tax liabilities....................... 65,877 62,988
Deferred tax assets:
Domestic NOL carryforwards................................ 41,494 28,136
Domestic tax credit carryforwards......................... 6,737 8,429
Foreign NOL carryforwards................................. 303 3,923
Reserve for compensation related items.................... 10,536 15,612
Other..................................................... 15,135 14,278
------- -------
Total deferred tax assets............................ 74,205 70,378
Valuation allowance on deferred tax assets.................. (4,297) (9,659)
------- -------
Net deferred tax assets..................................... 69,908 60,719
------- -------
Net deferred tax (asset) liability.......................... $(4,031) $ 2,269
======= =======
The valuation allowance was decreased by $5.4 million in 2000 primarily due
to the expiration of various tax credits and was increased by $0.9 million in
1999. The allowance is provided because it is more likely than not that certain
foreign NOL and tax credit carryforwards may not be fully utilized.
35
37
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax (expense) benefit differs from the statutory U.S. Federal income
tax rate of 35% applied to earnings (loss) before income taxes for the years
ended December 31, 2000, 1999 and 1998 as follows (in thousands):
2000 1999 1998
------ ------- -------
Statutory tax (expense) benefit........................... $4,783 $10,347 $(2,303)
Effects of--
State income taxes, net of Federal income tax effect.... 1,173 1,691 (447)
Nondeductible meals and entertainment................... (453) (406) (428)
Nondeductible acquisition/organization costs............ (153) (160) (180)
Foreign losses and taxes................................ 265 (338) 558
Valuation allowance..................................... -- (713) 400
Other non-taxable income (non-deductible expenses)...... 510 753 (335)
------ ------- -------
$6,125 $11,174 $(2,735)
====== ======= =======
6. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, were as follows (in thousands):
2000 1999
------- -------
Billed...................................................... $69,822 $73,605
Unbilled.................................................... 14,706 24,294
------- -------
84,528 97,899
Reserve for accounts receivable............................. (3,918) (3,774)
------- -------
$80,610 $94,125
======= =======
Payments received in advance of revenue recognition are reflected in the
consolidated financial statements as deferred revenue. Unbilled accounts
receivable represent revenues and fees on contracts and other services earned to
date for which customers were not invoiced as of the balance sheet date.
7. PROPERTY AND EQUIPMENT
Property and equipment at December 31, were as follows (in thousands):
2000 1999
--------- ---------
Computer equipment and software............................. $ 118,355 $ 117,411
Market testing and other operating equipment................ 33,263 33,619
Leasehold improvements...................................... 17,708 15,961
Equipment and furniture..................................... 34,183 37,544
--------- ---------
203,509 204,535
Accumulated depreciation.................................... (127,777) (123,550)
--------- ---------
$ 75,732 $ 80,985
========= =========
At December 31, 2000 the net book value of computer equipment under capital
leases aggregated $6.0 million and is included in the above amounts.
36
38
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INVESTMENTS AND OTHER ASSETS
Investments at December 31, were as follows (in thousands):
2000 1999
------- ------
Mosaic InfoForce, L.P. at cost plus equity in undistributed
earnings.................................................. $ 6,101 $ --
Datos Information Resources, at cost plus equity in
undistributed earnings.................................... 4,439 4,926
GfK Panel Services Benelux B.V., at cost.................... 1,315 1,315
Middle East Market Research Bureau ("MEMRB"), at cost....... 2,795 2,808
Other....................................................... 1,208 575
------- ------
$15,858 $9,624
======= ======
Other assets at December 31, were as follows (in thousands):
2000 1999
-------- --------
Deferred data procurement costs -- net of accumulated
amortization of $132,884 in 2000 and $133,596 in 1999..... $142,036 $140,285
Intangible assets, including goodwill -- net of accumulated
amortization of $12,026 in 2000 and $15,050 in 1999....... 9,370 11,659
Capitalized software costs -- net of accumulated
amortization of $4,716 in 2000 and $3,149 in 1999......... 5,862 7,799
Other....................................................... 8,738 7,357
-------- --------
$166,006 $167,100
======== ========
Commercial software development costs of $1.6 million, $7.3 million and
$7.2 million were capitalized for the years ended December 31, 2000, 1999 and
1998.
9. LONG-TERM DEBT
Long-term debt at December 31, was as follows (in thousands):
2000 1999
------- -------
Bank borrowings............................................. $21,000 $10,000
Capitalized leases and other................................ 5,965 819
------- -------
26,965 10,819
Less current maturities..................................... (2,337) (55)
------- -------
$24,628 $10,764
======= =======
During October 2000, the Company amended certain financial covenants and
other terms and conditions of its $60 million bank revolving credit facility.
The amended facility has floating rate options at or below prime and commitment
fees of up to 0.5% payable on the unused portion, and a termination date of
2002. The weighted average interest rates at December 31, 2000 and 1999 were
8.27% and 6.53%, respectively.
The financial covenants in the bank credit agreement, as well as in the
lease agreement for the Company's Chicago headquarters, require the Company to
maintain a minimum tangible net worth and to meet certain cash flow coverage and
leverage ratios. The agreements also limit the Company's ability to declare
dividends or make distributions to holders of capital stock, or redeem or
otherwise acquire shares of the Company. Approximately $5.3 million is currently
available for such distributions under the most restrictive of these covenants.
The bank credit agreement contains covenants which restrict the Company's
ability to incur additional indebtedness. Further, the agreement grants the bank
a security interest in the
37
39
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's assets if certain financial covenants are not met. As of December 31,
2000, the Company was in compliance with all covenants.
Capitalized leases and other primarily consist of leases for computer
equipment expiring through 2003 with payments aggregating $6.8 million.
Maturities of capitalized leases during each of the years 2001 through 2003 are
$2.3 million, $2.6 million and $1.0 million, respectively.
10. CAPITAL STOCK
PREFERRED STOCK PURCHASE RIGHTS
In 1989, IRI adopted a shareholder rights plan which attached preferred
stock rights ("Rights") to each share of its Common Stock. Each Right entitles
the holder to purchase one one-hundredth share of Preferred Stock at an exercise
price of $60. The Rights become exercisable upon the acquisition of a certain
percentage of IRI Common Stock or a tender offer or exchange offer for IRI
Common Stock by a person or group. IRI may redeem the Rights at $.01 per Right
at any time prior to a public announcement that a person or group has acquired a
certain percentage of IRI's Common Stock. The Rights will expire on October 27,
2007. IRI has authority to issue one million shares of $.01 par value Preferred
Stock.
COMMON STOCK
At December 31, 2000, 1999 and 1998, 29,069,892, 29,068,657 and 27,867,884
shares of Common Stock, respectively, were issued and outstanding. In connection
with the IRI Directors' Plan (see below), approximately 36,968 shares were
reserved for future issuance at December 31, 2000. In connection with all IRI
employee stock option plans, 10.8 million shares were reserved for issuance at
December 31, 2000. These reserved shares were reduced by 8.7 million stock
options outstanding at December 31, 2000, resulting in 2.1 million stock options
available for grant under the 1992 Executive Stock Option Plan, the Employee
Nonqualified Stock Option Plan and the Amended and Restated 1992 Stock Option
Plan.
In May 2000, the Company established the 2000 Employee Stock Purchase Plan
("ESPP") providing employees the opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. The plan qualifies as an
Employee Stock Purchase Plan under Section 423 of the Internal Revenue Code of
1986, as amended. Employees are eligible to purchase Common Stock at the end of
an accumulation period at an amount equal to 85% of the fair market value of a
share of Common Stock on the first or last day of an accumulation period,
whichever is lower. Employees are restricted from trading stock purchased under
the ESPP for six months from the date of purchase. In December 2000, the end of
the first accumulation period under the ESPP, the Company sold 158,827 shares of
Common Stock held in treasury for $0.4 million to employees participating in
ESPP.
During 2000, the Company began acquiring shares of its Common Stock in
connection with a stock repurchase program announced in August 2000 that was
established to acquire shares to fund the Company's ESPP. The program, approved
by the Company's Board of Directors, authorizes the periodic repurchase of up to
one million shares of its Common Stock on the open market, or in privately
negotiated transactions, depending upon market conditions and other factors. The
Company purchased 158,700 shares of Common Stock, at an average cost of $5.88
per share, aggregating $0.9 million during 2000.
In May 1996, the Company's shareholders approved a stock plan for
non-employee directors (the "IRI Directors' Plan"), authorizing the issuance of
up to 100,000 shares of Common Stock. Under the IRI Directors' Plan, an eligible
director is paid annually in shares of Common Stock in lieu of 75% of the cash
retainer otherwise payable for services on the Board. The number of shares
issued is based upon the fair market value of the Company's Common Stock. The
Company issued 13,098, 21,215, and 8,154 shares in 2000, 1999 and 1998 at a
price of $5.41, $8.72 and $17.38 per share, respectively, under the IRI
Directors' Plan.
38
40
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There are restrictions in IRI's bank revolving credit facility and lease
agreements which limit the payment of dividends and the purchases or redemption
of Common Stock. (See Note 9.)
STOCK OPTIONS
The Company has several stock option plans. The Employee Stock Option Plan
and the Amended and Restated 1992 Stock Option Plan cover most employees other
than executive officers and directors. Substantially all options under these
plans have been granted at fair market value or higher. Most option grants are
exercisable in equal annual increments of 25% beginning on the first anniversary
of the grant date and expire ten years after the date of grant. IRI also has an
Executive Stock Option Plan covering executive officers and directors which at
inception authorized up to 2.5 million stock options. Most options under this
plan were granted at fair market value and are exercisable in equal annual
increments of 25% beginning on the first anniversary of the grant date and
expire ten years after the date of grant. For options granted at less than fair
market value, the Company recognizes compensation expense over the vesting
period for the difference between the total fair market value and the total
exercise price on the date of grant.
The following table presents, on a pro forma basis, net earnings (loss) and
net earnings (loss) per share for the years ended December 31, 2000, 1999 and
1998 as if an alternate method of accounting as prescribed by Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" for stock
options had been adopted (in thousands, except per share data):
2000 1999 1998
-------- -------- ------
Net earnings (loss) -- as reported...................... $ (7,538) $(18,388) $3,846
======== ======== ======
Net earnings (loss) -- pro forma........................ $(10,670) $(21,687) $ 981
======== ======== ======
Net earnings (loss) per common share -- basic -- as
reported.............................................. $ (.26) $ (.66) $ .13
======== ======== ======
Net earnings (loss) per common share -- basic -- pro
forma................................................. $ (.37) $ (.77) $ .03
======== ======== ======
Net earnings (loss) per common and common equivalent
share -- diluted -- as reported....................... $ (.26) $ (.66) $ .13
======== ======== ======
Net earnings (loss) per common and common equivalent
share -- diluted -- pro forma......................... $ (.37) $ (.77) $ .03
======== ======== ======
The above table is based upon the valuation of option grants using the
Black-Scholes pricing model for traded options with assumed risk-free interest
rates of 6.15%, 5.5% and 5.5% for 2000, 1999 and 1998, respectively; stock price
volatility factor of 69.0%, 61.0% and 55.9% for 2000, 1999 and 1998,
respectively; and an expected life of the options of five years. Using the
foregoing assumptions, the calculated weighted-average fair value of options
granted in 2000, 1999 and 1998 was $3.19, $5.01 and $6.64, respectively. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the input
assumptions can materially affect the fair value estimate, in management's
opinion, the model does not necessarily provide a reliable single measure of the
fair value of its employee stock options.
39
41
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Transactions involving stock options for the Executive and Employee Stock
Option Plans are summarized as follows:
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF OPTIONS PRICE
---------- --------
Outstanding January 1, 1998................................. 7,261,623 $14.36
Granted..................................................... 1,647,345 12.52
Canceled/Expired............................................ (997,762) 15.89
Exercised................................................... (584,972) 13.88
---------- ------
Outstanding December 31, 1998............................... 7,326,234 13.73
Granted..................................................... 1,461,500 8.80
Canceled/Expired............................................ (1,238,931) 14.58
Exercised................................................... (97,430) 9.85
---------- ------
Outstanding December 31, 1999............................... 7,451,373 12.68
Granted..................................................... 3,400,215 5.12
Canceled/Expired............................................ (2,147,471) 12.32
Exercised................................................... -- --
---------- ------
Outstanding December 31, 2000............................... 8,704,117 $ 9.82
========== ======
Exercisable December 31, 2000............................... 4,025,198 $13.60
========== ======
Stock options outstanding at December 31, 2000 are as follows:
WEIGHTED OUTSTANDING EXERCISABLE
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------------ ----------- ----------- ----------- ----------- -----------
$3.438-$4.125.................. 2,215,000 9.47 $ 3.91 -- $ --
$4.375-$9.50................... 2,309,525 8.27 $ 7.66 592,844 8.44
$9.563-$14.00.................. 2,381,848 6.10 $12.72 1,702,234 12.89
$14.125-$34.00................. 1,797,744 2.93 $16.02 1,730,120 16.06
--------- ---- ------ --------- ------
$3.438-$34.00.................. 8,704,117 6.88 $ 9.82 4,025,198 $13.60
========= ==== ====== ========= ======
11. COMMITMENTS, CONTINGENCIES AND LITIGATION
LEASE AGREEMENTS AND OTHER COMMITMENTS
Future minimum lease payments under all operating leases as of December 31,
2000 are as follows (in thousands):
YEAR ENDING DECEMBER 31, OPERATING LEASE PAYMENTS
------------------------ ------------------------
2001........................................................ $ 27,656
2002........................................................ 23,763
2003........................................................ 16,938
2004........................................................ 12,818
2005........................................................ 10,807
After 2005.................................................. 39,903
--------
Total minimum lease payments................................ $131,885
========
40
42
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total rental expense for the years ended December 31, 2000, 1999 and 1998
was $24.9 million, $27.4 million and $30.9 million, respectively.
LEGAL PROCEEDINGS
On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp.,
The A.C. Nielsen Company (now a subsidiary of ACNielsen) and IMS International,
Inc. (collectively, the "Defendants") in the United States District Court for
the Southern District of New York entitled Information Resources, Inc. v. The
Dun & Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged
that, among other things, the Defendants violated Sections 1 and 2 of the
Sherman Act, 15 U.S.C. Sections 1 and 2, by engaging in a series of
anti-competitive practices aimed at excluding the Company from various export
markets for retail tracking services and regaining monopoly power in the United
States market for such services. These practices included: i) entering into
exclusionary contracts with retailers in several countries, in order to restrict
the Company's access to sales data necessary to provide retail tracking
services; ii) illegally tying/bundling services in markets over which
Defendants' had monopoly power with services in markets in which ACNielsen
competed with the Company; iii) predatory pricing; iv) acquiring foreign market
competitors with the intent of impeding the Company's efforts at export market
expansion; v) tortiously interfering with Company contracts and relationships
with clients, joint venture partners and other market research companies; and
vi) disparaging the Company to financial analysts and clients. By the Action,
the Company sought to enjoin the Defendants' anti-competitive practices and to
recover damages in excess of $350 million, prior to trebling. On July 13, 2000,
the District Court in a procedural ruling held that IRI lacked standing to
assert claims for injury suffered from Defendants' activities in foreign markets
where IRI operates through subsidiaries or companies owned by joint ventures and
dismissed such claims. On February 6, 2001, the Court denied IRI leave to join
its subsidiaries as parties to assert such claims for injury concluding that it
lacked subject matter jurisdiction under the Sherman Act. IRI is currently
weighing its options concerning claims for injury suffered by IRI or its
subsidiaries in markets outside the United States.
On January 15, 1999, IRI filed an action against Manugistics, Inc.
("Manugistics") in the Circuit Court of Cook County, Illinois, Case No. 99 L
00599. In Count I of its two count action, IRI has alleged that Manugistics has
breached a Data Marketing and Guaranteed Revenue Agreement between IRI and
Manugistics ("Agreement") by failing to pay certain amounts due to IRI
thereunder. The Agreement was entered into by IRI and Manugistics in connection
with the sale by IRI to Manugistics of certain assets relating to the
manufacture, sale and servicing of certain logistics software. IRI has also
alleged that Manugistics committed an anticipatory breach of the Agreement with
respect to certain other amounts not yet due thereunder. IRI now seeks damages
in excess of $15.0 million in connection with these claims. In Count II, IRI has
alleged that Manugistics breached a related Non-Competition and Non-Solicitation
agreement between IRI and Manugistics (the "Non-Competition Agreement"). IRI
seeks unspecified damages to be determined at trial under this count. On March
2, 1999, Manugistics filed a Motion to Stay Proceedings and Compel Arbitration.
IRI agreed to arbitrate all claims related to the Agreement and filed an
arbitration demand before the American Arbitration Association on July 9, 1999.
The Arbitrator scheduled the arbitration to commence on November 5, 2001. IRI's
claims against Manugistics for breach of the Non-Competition Agreement remain
pending before the Circuit Court. Manugistics denies that it owes IRI any
damages, claiming a failure of consideration. IRI vigorously disputes this
assertion.
In the ordinary course of business, IRI and its subsidiaries become
involved as plaintiffs or defendants in various other legal proceedings. The
claims and counterclaims in such litigation, including those for punitive
damages, individually in certain cases and in the aggregate, involve amounts
which may be material. However, it is the opinion of the Company's management,
based upon the advice of counsel, that the ultimate disposition of pending
litigation against the Company will not be material.
41
43
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SEGMENT INFORMATION
The Company develops and maintains databases, decision support software,
and mathematical models, primarily for the analysis of detailed information on
purchasing of consumer goods, all within one industry segment -- business
information services. The Company's business information services are conducted
almost exclusively in the United States and Europe. The Company's operations in
other markets account for approximately 1% of consolidated revenues. Executive
management of the Company routinely evaluates the performance of its operations
against short-term and long-term objectives.
The Company's segment disclosure by geographic areas is consistent with the
management structure of the Company. The executive management of the Company
considers revenues from third parties and the aggregation of operating profit
(loss), equity earnings (losses) and minority interests, ("Operating Results"),
on a geographic basis to be the most meaningful measure of the operating
performance of each respective geographic segment and of the Company as a whole.
42
44
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following tables and discussion present certain information regarding
the operations of the Company by geographic segment as of December 31, 2000,
1999, and 1998 (in thousands):
SEGMENTED RESULTS:
2000 1999 1998
-------- -------- --------
Revenues:
U.S. Services............................................. $397,895 $416,729 $396,992
International Services.................................... 133,028 129,544 114,331
-------- -------- --------
Total............................................. $530,923 $546,273 $511,323
======== ======== ========
Operating Results:
U.S. Services............................................. $ 15,833 $ 25,672 $ 31,515
International Services:
Operating loss............................................ (4,628) (13,709) (15,689)
Minority interests benefit................................ 2,746 4,256 342
Equity in earnings of affiliated companies................ 575 205 443
-------- -------- --------
Subtotal-- International Services................. (1,307) (9,248) (14,904)
Corporate and other expenses including equity in loss of
affiliated companies...................................... (10,960) (11,848) (8,856)
Defined contribution plan expense (a)....................... -- (7,931) --
Restructuring and other charges (b)......................... (13,590) (24,755) --
-------- -------- --------
Operating Results................................. (10,024) (28,110) 7,755
Interest expense and other, net............................. (3,639) (1,452) (1,174)
-------- -------- --------
Earnings (loss) before income taxes............... $(13,663) $(29,562) $ 6,581
======== ======== ========
IDENTIFIABLE ASSETS:
2000 1999 1998
-------- -------- --------
U.S. Services............................................... $223,916 $237,913 $232,851
International Services...................................... 126,258 120,943 126,650
Corporate(c)................................................ 14,986 9,624 9,792
-------- -------- --------
Total Identifiable Assets......................... $365,160 $368,480 $369,293
======== ======== ========
- ---------------
(a) $5.5 million, $2.1 million and $0.3 million of defined contribution plan
expense relates to U.S. Services, International Services and Corporate,
respectively.
(b) $7.4 million, $7.1 million and $(.9) million of restructuring and other
charges relate to U.S. Services, International Services and Corporate,
respectively, for the year ended December 31, 2000 and $19.7 million, $4.2
million and $.9 million of restructuring and other charges relate to U.S.
Services, International Services and Corporate, respectively, for the year
ended December 31, 1999.
(c) Identifiable corporate assets represent investments. (See Note 8.)
43
45
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER CASH FLOW INFORMATION:
UNITED
STATES INTERNATIONAL CORPORATE TOTAL
------ ------------- --------- -----
(IN THOUSANDS)
Capital expenditures
2000.............................................. $11,860 $ 5,791 $2,117 $ 19,768
1999.............................................. 23,394 5,413 2,335 31,142
1998.............................................. 26,976 5,453 1,302 33,731
Depreciation expense
2000.............................................. $21,216 $ 4,618 $3,941 $ 29,775
1999.............................................. 18,946 4,686 3,336 26,968
1998.............................................. 16,556 4,921 1,761 23,238
Data procurement expenditures
2000.............................................. $74,761 $50,079 $ -- $124,840
1999.............................................. 80,740 49,472 -- 130,212
1998.............................................. 76,940 43,553 -- 120,493
Amortization of data procurement expenditures
2000.............................................. $75,749 $44,082 $ -- $119,831
1999.............................................. 78,508 41,719 -- 120,227
1998.............................................. 74,583 37,528 -- 112,111
44
46
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUMMARY OF QUARTERLY DATA (UNAUDITED)
Summaries of consolidated results on a quarterly basis are as follows (in
thousands, except per share data):
2000
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
Revenues............................................ $129,141 $133,931 $131,672 $136,179
======== ======== ======== ========
Restructuring and other charges..................... (3,557) (2,082) (3,157) (4,794)
======== ======== ======== ========
Operating profit (loss)............................. (6,961) (1,671) 882 (4,532)
======== ======== ======== ========
Net loss............................................ (3,554) (987) (598) (2,399)
======== ======== ======== ========
Net loss per common share -- basic.................. (.12) (.03) (.02) (.08)
======== ======== ======== ========
Net loss per common and common equivalent share --
diluted........................................... (.12) (.03) (.02) (.08)
======== ======== ======== ========
Weighted average common shares -- basic............. 29,068 29,071 29,046 28,952
======== ======== ======== ========
Weighted average common and common equivalent shares
-- diluted........................................ 29,068 29,071 29,046 28,952
======== ======== ======== ========
1999
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
Revenues............................................ $131,745 $137,847 $136,092 $140,589
======== ======== ======== ========
Defined contribution plan........................... -- -- -- (7,931)
======== ======== ======== ========
Restructuring and other charges..................... -- -- -- (24,755)
======== ======== ======== ========
Operating profit (loss)............................. (1,774) 394 1,921 (33,112)
======== ======== ======== ========
Net earnings (loss)................................. (251) 468 1,328 (19,933)
======== ======== ======== ========
Net earnings (loss) per common share -- basic....... (.01) .02 .05 (.71)
======== ======== ======== ========
Net earnings (loss) per common and common equivalent
share -- diluted.................................. (.01) .02 .05 (.71)
======== ======== ======== ========
Weighted average common shares--basic............... 27,865 28,080 28,120 28,185
======== ======== ======== ========
Weighted average common and common equivalent shares
-- diluted........................................ 27,865 28,098 28,267 28,185
======== ======== ======== ========
45
47
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" are incorporated by reference from the
definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 2001 annual meeting of stockholders
scheduled for May 18, 2001. Information about the Company's executive officers
is set forth in Item 4(a) in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" excluding the Board
Compensation Committee Report and the stock price performance graph is
incorporated by reference from the definitive proxy statement to be filed with
the Securities and Exchange Commission in connection with the Company's 2001
annual meeting of stockholders scheduled for May 18, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Ownership of Securities" is incorporated by reference
from the definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 2001 annual meeting of stockholders
scheduled for May 18, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" is incorporated by reference
from the definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 2001 annual meeting of stockholders
scheduled for May 18, 2001.
46
48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this Report:
1. Financial Statements
The consolidated financial statements of the Company are included in
Part II, Item 8 of this Report.
PAGE
NO.
----
2. Financial Statement Schedules
Schedule II-- Valuation and Qualifying Accounts; Reserve for
Accounts Receivable......................................... 49
All other schedules are omitted because they are not
applicable, or not required, or because the required
information is included in the financial statements or notes
thereto.
3. Executive Compensation Plans and Arrangements. The following
Executive Compensation Plans and Arrangements are listed as
exhibits to this Form 10-K:
Form of letter agreement between the Company and John D.C.
Little.
Consulting and Noncompetition Agreement dated January 16,
1987 between the Company and Edwin Epstein.
Agreement effective January 1, 1989 between the Company and
Edwin Epstein, amending the Consulting and Noncompetition
Agreement dated January 16, 1987, which Consulting and
Noncompetition Agreement is referred to above.
Letter agreement dated August 7, 1989 between the Company
and Leonard Lodish.
Form of Information Resources, Inc. Directorship/Officership
Agreement between the Company and its directors, its
executive officers and certain other officers.
Information Resources, Inc. Executive Deferred Compensation
Plan effective January 1, 1999.
Employment agreement dated April 30, 1999 between the
Company and Joseph P. Durrett.
Restricted stock agreement dated April 30, 1999 between the
Company and Joseph P. Durrett.
Employment agreement dated May 28, 1999 between the Company
and Rick Kurz.
Information Resources, Inc. 1999 Restricted Stock Plan.
Information Resources, Inc. 1999 Nonqualified Defined
Contribution Plan.
Information Resources, Inc. 1999 Nonqualified Defined
Contribution Plan Trust.
Employment agreement dated March 1, 1999, as amended by
letter agreement dated April 27, 1999, between the Company
and Timothy Bowles.
Employment letter agreement dated September 8, 1999, as
amended by letters dated September 11, 1999 and September
15, 1999, respectively, between the Company and Edward
Kuehnle.
Employment agreement dated February 4, 2000 between the
Company and Andrew Balbirer.
47
49
PAGE
NO.
----
Amendment to employment letter agreement dated June 16, 2000
between the Company and Edward Kuehnle.
Amended and Restated 1992 Stock Option Plan, as amended
effective June 29, 2000.
1992 Executive Stock Option Plan, as amended effective June
29, 2000.
Employee Nonqualified Stock Option Plan, as amended
effective June 29, 2000.
Employment letter agreement dated May 19, 2000 between the
Company and Mary K. Sinclair.
Form of Employment and Change in Control Agreement between
the Company and certain executive officers.
Directors Deferred Compensation Plan.
Information Resources, Inc. 2000 Employee Stock Purchase
Plan effective as of May 19, 2000.
(b) Reports on 8-K:
None
(c) Exhibits
See Exhibit Index (immediately following the signature page)
48
50
SCHEDULE II
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
RESERVE FOR ACCOUNTS RECEIVABLE
(IN THOUSANDS)
CHARGED
BALANCE AT TO COSTS DEDUCTIONS BALANCE AT
BEGINNING AND (NET WRITEOFFS/ END OF
DESCRIPTION OF PERIOD EXPENSES RECOVERIES) PERIOD
----------- ---------- -------- --------------- ----------
Year ended December 31, 1998...................... $3,840 $1,883 $ (961) $4,762
Year ended December 31, 1999...................... $4,762 $ 285 $(1,273) $3,774
Year ended December 31, 2000...................... $3,774 $1,121 $ (977) $3,918
49
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: March 28, 2001
INFORMATION RESOURCES, INC.
By: /s/ JOSEPH P. DURRETT
----------------------------------
Joseph P. Durrett
President and Chief Executive
Officer
Pursuant to the Requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 28, 2001.
SIGNATURE TITLE
--------- -----
/s/ JOSEPH P. DURRETT Chairman of the Board of Directors,
- ----------------------------------------------------------- President, Chief Executive Officer and
Joseph P. Durrett Director
/s/ ANDREW G. BALBIRER Executive Vice President and Chief
- ----------------------------------------------------------- Financial Officer [Principal financial
Andrew G. Balbirer officer]
/s/ MARY K. SINCLAIR Executive Vice President and Controller
- ----------------------------------------------------------- [Principal accounting officer]
Mary K. Sinclair
* /s/ JAMES G. ANDRESS Director
- -----------------------------------------------------------
James G. Andress
* /s/ WILLIAM B. CONNELL Director
- -----------------------------------------------------------
William B. Connell
* /s/ EDWIN E. EPSTEIN Director
- -----------------------------------------------------------
Edwin E. Epstein
* /s/ BRUCE A. GESCHEIDER Director
- -----------------------------------------------------------
Bruce A. Gescheider
* /s/ JOHN D.C. LITTLE Director
- -----------------------------------------------------------
John D.C. Little
* /s/ LEONARD M. LODISH Director
- -----------------------------------------------------------
Leonard M. Lodish
* /s/ EDWARD E. LUCENTE Director
- -----------------------------------------------------------
Edward E. Lucente
* /s/ JEFFERY P. STAMEN Director
- -----------------------------------------------------------
Jeffrey P. Stamen
50
52
SIGNATURE TITLE
--------- -----
* /s/ RAYMOND H. VAN WAGENER, JR. Director
- -----------------------------------------------------------
Raymond H. Van Wagener, Jr.
* /s/ THOMAS W. WILSON, JR. Director
- -----------------------------------------------------------
Thomas W. Wilson, Jr.
*By: /s/ JOSEPH P. DURRETT
---------------------------------------------------
Pursuant to a Power of Attorney
51
53
EXHIBIT INDEX
The following documents are the exhibits to this Report. For convenient
reference, each exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K.
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
- ------- ----------------------- ----------
3(a) -- Copy of the certificate of incorporation of the Company
dated May 27, 1982, as amended. (Incorporated by
reference. Previously filed as Exhibit 3(a) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988) IBRF
(b) -- Copy of the bylaws of the Company, as amended.
(Incorporated by reference. Previously filed as Exhibit
3(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988). IBRF
(c) -- Copy of amendments to the Certificate of Incorporation
approved by the stockholders on May 16, 1989.
(Incorporated by reference. Previously filed as Exhibit
3(c) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989) IBRF
(d) -- Copy of amendments to the bylaws of the Company as
approved by the Board of Directors bringing the bylaws
into conformity with the amendments to the Certificate of
Incorporation approved by the stockholders May 16, 1989.
(Incorporated by reference. Previously filed as Exhibit
3(d) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989) IBRF
(e) -- Certificate of Designations of Series A Participating
Preferred Stock, as adopted by the Board of Directors of
the Company on March 2, 1989 and duly filed with the
Secretary of State of the State of Delaware March 15,
1989. (Incorporated by reference. Previously filed as
Exhibit 3(e) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989) IBRF
10 -- Material Contracts
(a) -- Information Resources, Inc., Nonqualified Stock Option
Plan effective January 1, 1984, as amended. (Incorporated
by reference. Previously filed as Exhibit 10(b) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1988) IBRF
(b) -- Consulting and Noncompetition Agreement dated January 16,
1987 between the Company and Edwin Epstein. (Incorporated
by reference. Previously filed as Exhibit 10(e) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987) IBRF
(c) -- Form of letter agreement between the Company and John
D.C. Little. (Incorporated by reference. Previously filed
as Exhibit 10(m) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989) IBRF
(d) -- Agreement effective January 1, 1989 between the Company
and Edwin Epstein, amending the Consulting and
Noncompetition Agreement dated January 16, 1987, which
Consulting and Noncompetition Agreement is referred to in
Exhibit 10(b) hereof. (Incorporated by reference.
Previously filed as Exhibit 19(a) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989) IBRF
(e) -- Letter agreement dated August 7, 1989 between the Company
and Leonard Lodish. (Incorporated by reference.
Previously filed as Exhibit 3(q) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989) IBRF
52
54
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
- ------- ----------------------- ----------
(f) -- Lease Agreement dated September 27, 1990 between
Randolph/ Clinton Limited Partnership and the Company.
(Incorporated by reference. Previously filed as Exhibit
2.1 to the Company's Current Report on Form 8-K dated
September 27, 1990) IBRF
(g) -- Second Amendment to Lease Agreement dated September 27,
1990 between the Company and Randolph/Clinton Limited
Partnership. (Incorporated by reference. Previously filed
as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995) IBRF
(h) -- Amended and Restated Asset Purchase Agreement dated as of
June 12, 1995 by and between the Company and Oracle
Corporation. (Incorporated by reference. Previously filed
as Exhibit 2.1 to the Company's Current Report on Form
8-K dated July 27, 1995 and filed August 11, 1995) IBRF
(i) -- Licenses-Back Agreement dated as of July 27, 1995 between
the Company and Oracle Corporation. (Incorporated by
reference. Previously filed as Exhibit B to the Amended
and Restated Asset Purchase Agreement dated as of July
27, 1995 filed as Exhibit 2.1 to the Current Report on
Form 8-K dated July 27, 1995 and filed August 11, 1995) IBRF
(j) -- Form of Information Resources, Inc.
Directorship/Officership Agreement between the Company
and each of its directors, executive officers and certain
other officers. (Incorporated by reference. Previously
filed as Exhibit 10(x) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994). IBRF
(k) -- Information Resources, Inc. Amended and Restated 401(k)
Retirement Savings Plan and Trust adopted by the Company
effective May 24, 1995. (Incorporated by reference.
Previously filed as Exhibit 10(hh) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996) IBRF
(l) -- First Amendment to the Information Resources, Inc.
Amended and Restated 401(k) Retirement Savings Plan
effective July 1, 1996. (Incorporated by reference.
Previously filed as Exhibit 10(ii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996) IBRF
(m) -- Second Amendment to the Information Resources, Inc.
Amended and Restated 401(k) Retirement Savings Plan
effective March 1, 1997. (Incorporated by reference.
Previously filed as Exhibit 10(jj) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996) IBRF
(n) -- Trust Agreement between Information Resources, Inc. and
Fidelity Management Trust Company dated as of July 1,
1996. (Incorporated by reference. Previously filed as
Exhibit 10(kk) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996) IBRF
(o) -- First Amendment to Trust Agreement between Fidelity
Management Trust Company and Information Resources, Inc.
effective March 1, 1997. (Incorporated by reference.
Previously filed as Exhibit 10(ll) to the Company's
Annual Report on Form 10K for the fiscal year ended
December 31, 1996) IBRF
(p) -- Credit Agreement dated October 31, 1997 among the
Company, the Bank Parties thereto and Harris Trust and
Savings Bank, as Agent. (Incorporated by reference.
Previously filed as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997) IBRF
53
55
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
- ------- ----------------------- ----------
(q) -- Rights Agreement between Information Resources, Inc. and
Harris Trust and Savings Bank, amended and restated as of
October 27, 1997. (Incorporated by reference. Previously
filed as Exhibit 4.2 to the Company's Current Report on
Form 8-A/A dated October 27, 1997 and filed October 28,
1997) IBRF
(r) -- Information Resources, Inc. Executive Deferred
Compensation Plan effective January 1, 1999.
(Incorporated by reference. Previously filed as Exhibit
10(ff) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998) IBRF
(s) -- First Amendment to Credit Agreement dated as of February
10, 1999 between the Company, the Banks Party thereto and
Harris Trust and Savings Bank, as agent for the Banks.
(Incorporated by reference. Previously filed as Exhibit
10(hh) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998). IBRF
(t) -- Employment agreement dated April 30, 1999 between the
Company and Joseph P. Durrett. (Incorporated by
reference. Previously filed as Exhibit 10(kk) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999) IBRF
(u) -- Restricted stock agreement dated April 30, 1999 between
the Company and Joseph P. Durrett. (Incorporated by
reference. Previously filed as Exhibit 10(ll) to the
Company's Quarterly Report Form on 10-Q for the quarter
ended June 30, 1999) IBRF
(v) -- Employment agreement dated May 28, 1999 between the
Company and Rick Kurz. (Incorporated by reference.
Previously filed as Exhibit 10(mm) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1999) IBRF
(w) -- Information Resources, Inc. 1999 Restricted Stock Plan.
(Incorporated by reference. Previously filed as Exhibit
99-1 to the Company's Registration Statement filed with
the SEC on February 25, 2000). IBRF
(x) -- Information Resources, Inc. 1999 Nonqualified Defined
Contribution Plan. (Incorporated by reference. Previously
filed as Exhibit 99-2 to the Company's Registration
Statement filed with the SEC on February 25, 2000) IBRF
(y) -- Information Resources, Inc. 1999 Nonqualified Defined
Contribution Plan Trust. (Incorporated by reference.
Previously filed as Exhibit 99-3 to the Company's
Registration Statement filed with the SEC on February 25,
2000) IBRF
(z) -- Second Amendment to Credit Agreement dated as of February
9, 2000 between the Company, the Banks party thereto and
Harris Trust and Savings Bank, as agent for the Banks.
(Incorporated by reference. Previously filed as Exhibit
10(gg) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999). IBRF
(aa) -- Employment agreement dated March 1, 1999, as amended by
letter agreement dated April 27, 1999, between the
Company and Timothy Bowles. (Incorporated by reference.
Previously filed as Exhibit 10(hh) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999) IBRF
(bb) -- Employment letter agreement dated September 8, 1999, as
amended by letters dated September 11 and September 13,
respectively, between the Company and Edward Kuehnle.
(Incorporated by reference. Previously filed as Exhibit
10(ii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999). IBRF
54
56
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
- ------- ----------------------- ----------
(cc) -- Employment agreement dated February 4, 2000 between the
Company and Andrew Balbirer. (Incorporated by reference.
Previously filed as Exhibit 10(jj) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999) IBRF
(dd) -- Amendment to employment letter agreement dated June 16,
2000 between the Company and Edward Kuehnle.
(Incorporated by reference. Previously filed as Exhibit
10(kk) to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000) IBRF
(ee) -- Amended and Restated 1992 Stock Option Plan, as amended
effective June 29, 2000. (Incorporated by reference.
Previously filed as Exhibit 10(ll) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2000) IBRF
(ff) -- 1992 Executive Stock Option Plan, as amended effective
June 29, 2000. (Incorporated by reference. Previously
filed as Exhibit 10(mm) to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000). IBRF
(gg) -- Employee Nonqualified Stock Option Plan, as amended
effective June 29, 2000. (Incorporated by reference.
Previously filed as Exhibit 10(nn) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2000) IBRF
(hh) -- Employment letter agreement dated May 19, 2000 between
the Company and Mary K. Sinclair. (Incorporated by
reference. Previously filed as Exhibit 10(oo) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000) IBRF
(ii) -- Form of Employment and Change in Control Agreement
between the Company and certain executive officers.
(Incorporated by reference. Previously filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000) IBRF
(jj) -- Outsourcing Services Agreement between the Company and
Mosaic InfoForce, L.P. (Incorporated by reference.
Previously filed as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000) IBRF
(kk) -- Information Resources, Inc. Third Amendment to Credit
Agreement. (Incorporated by reference. Previously filed
as Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000) IBRF
(ll) -- Directors Deferred Compensation Agreement. (Incorporated
by reference. Previously filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000). IBRF
(mm) -- Information Resources, Inc. 2000 Employee Stock Purchase
Plan effective as of May 19, 2000. (Incorporated by
reference. Previously filed as Exhibit 99.1 to the
Company's Registration Statement filed with the
Securities and Exchange Commission on June 15, 2000) IBRF
(nn) -- Fourth Amendment to Lease Agreement effective December
28, 2000 by and between the Company and Randolph/Clinton
Limited Partnership EF
18 -- Letter regarding change in accounting principle.
(Incorporated by reference. Previously filed as Exhibit
18 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994) IBRF
21 -- Subsidiaries of the Registrant (filed herewith) EF
23 -- Consent of Independent Auditors (filed herewith) EF
24 -- Powers of Attorney (filed herewith) EF
55